UNIVERSITY 

OF  CALIFORNIA 

LOS  ANGELES 


SCHOOL  OF  LAW 
LIBRARY 


STOCK  EXCHANGE  LAWS 


Stock  Exchange  Laws 


Affecting  members,  their  customers, 
brokers  and  investors 


BY 
SAMUEL  P.  GOLDMAN 

OF 
THE  NEW  YORK  BAR 


GARDEN  CITY       NEW  YORK 

DOUBLEDAY,  PAGE  fc  COMPANY 

1914 


Copyright,  1914,  by 

DOUBLEDAY,    PAGE    &    COMPANY 

All  rights  reserved,  including  that  of 

translation  into  foreign  languages, 

including  the  Scandinavian 


PREFACE 

THE  present  agitation  for  the  compulsory  incorpora- 
tion of  the  Stock  Exchange  and  the  enactment  of 
numerous  laws  having  as  their  object  the  regulation  of  the 
business  of  stock  brokerage  as  it  is  now  conducted  on 
the  Stock  Exchange  in  the  City  of  New  York  has  caused 
many  inquiries  to  be  made  of  the  author  of  this  book  for 
some  general  statement  of  the  law  which  could  be  used 
as  a  guide  by  stockbrokers  in  the  pursuit  of  their  occu- 
pation. 

In  response  to  such  inquiries,  and  to  requests  both 
from  members  of  the  Stock  Exchange  and  from  lawyers, 
this  compilation  has  been  made. 

It  is  not  the  purpose  of  the  book  to  provide  a  complete 
and  exhaustive  treatise  for  lawyers.  The  book  is  in- 
tended to  be  serviceable  to  stockbrokers,  as  well  as 
lawyers.  For  the  brokers,  it  should  provide  a  ready 
reference  book  which  they  may  read  understandingly, 
and  from  which  they  may  obtain  a  fairly  safe  guide 
to  their  conduct  in  their  ordinary  affairs,  without  ne- 
cessitating a  long  course  of  reading  or  study  or  a  con- 
ference with  a  lawyer  to  determine  their  duty  in  simple 
matters.  For  the  members  of  the  legal  profession,  it 
should  provide  a  ready  hand-book  from  which  they  can 
easily  get  the  leading  cases  and  principles  applicable  to 


•776862 


PREFACE 

those  matters  which  are  most  frequently  the  subject 
of  conference  with  their  clients. 

In  preparing  to  advise  his  clients,  the  author  was  im- 
pressed with  the  completeness  of  the  machinery  provided 
by  the  Exchange  for  the  safeguarding  of  the  public.  It 
was  found  that  the  power  of  the  Governing  Committee 
of  the  Exchange  for  purposes  of  discipline  was  almost 
without  limit,  and  that  the  constitution,  by-laws,  and 
rules  of  the  Exchange  and  its  governors  prohibited  every 
pernicious  practice  that  has  been  so  loudly  inveighed 
against  in  the  public  prints,  and  has  made  the  mad  rush 
for  legislation  upon  the  subject  a  truly  senseless  clamor. 

To  enumerate  the  more  important  laws,  to  explain 
them  and  show  their  application,  and  to  cite  the  main 
authorities  in  regard  thereto,  would  hardly  be  a  sufficient 
presentation  of  the  subject.  This  can  be  accomplished 
only  by  setting  forth  the  constitution  and  by-laws 
of  the  Exchange,  and  the  rules  of  the  Governing  Com- 
mittee, and  showing  their  coordination  with  the  Statutes, 
so  that  it  may  be  apparent  to  whomever  may  be  inter- 
ested that  even  a  slight  departure  from  the  standards 
set  by  the  Stock  Exchange  itself  will  bring  double  punish- 
ment upon  the  offending  member,  first,  by  way  of  pen- 
alty for  a  violation  of  the  law  of  the  State,  and  second, 
the  more  drastic  consequences  that  follow  an  infraction 
of  the  rules  of  the  Stock  Exchange. 

Before  undertaking  the  work  an  effort  was  made  to 
ascertain  whether  there  was  any  general  need  for  such 
a  compilation.  Inquiries  were  made,  not  only  of  nu- 
merous stockbrokers  and  of  their  customers,  but  also 

.vi 


PREFACE 

of  many  lawyers;  and  in  perhaps  a  half  dozen  instances 
bank  officials  were  questioned.  The  unanimous  ver- 
dict seemed  to  be  that  if  the  book  could  be  contained 
within  reasonable  limits,  and  could  be  couched  in  phrase- 
ology that  would  serve  bankers,  brokers,  and  custom- 
ers, as  well  as  lawyers,  it  would  become  a  handbook 
indeed,  and  would  fill  a  real  want. 

It  is  hoped  that  the  book  will  serve  this  purpose,  and 
that  its  kindlyxritics  will  not  fail  to  recognize  that  con- 
siderable discrimination  and  choice  were  necessary  to  get 
so  large  a  subject  within  so  small  a  space,  and  to  find 
words  that  would  prove  equally  suitable  to  both  lawyer 
and  layman. 

For  their  valuable  assistance  in  preparing  this  manu- 
script, I  wish  to  express  my  sincere  appreciation  to  my 
partners,  Mr.  M.  L.  Heidenheimer  and  Mr.  Wm.  F. 
Unger. 

Dated,  New  York,  1914. 


vu 


TABLE  OF  CONTENTS 
PART  ONE 

FACE 

The  Exchange  and  Its  Constitution     ....         i 

PART  Two 
Summary  of  Laws  and  Decisions 43 

PART  THREE 
The  Broker  and  His  Customer 73 

PART  FOUR 

Constitution,  By-laws,  and  Rules  of  the  New  York 

Stock  Exchange 117 

PART  FIVE 

Laws  of  the  State  of  New  York  Relating  to  Stock- 
brokers     195 

Table  of  Cases  Cited 253 

Index 267 


PART  I 
THE  EXCHANGE  AND  ITS  CONSTITUTION 

THE  New  York  Stock  Exchange  is  governed  by  a 
constitution  of  thirty-eight  articles,  which  has 
been  amended  from  time  to  time  to  meet  exigencies  as 
they  arose,  and  which  has,  for  its  members,  the  force 
of  laws.  In  this  Constitution  and  the  rules  accompany- 
ing it  the  interests  of  the  public  dealing  with  members 
of  the  Exchange  are  carefully  safeguarded,  even  to  the 
minutest  detail,  and  the  effort  is  made  so  to  regulate 
the  conduct  of  the  members  among  themselves  as  to 
hold  them  up  to  the  very  highest  standards  of  honesty 
and  fair  dealing.  Of  necessity  the  rules  are  strictly  en- 
forced. Sales  and  purchases  are  made  and  contracts 
undertaken  involving  thousands  of  dollars,  without 
any  written  memoranda,  a  nod  of  the  head  or  a  wave  of 
the  hand  being  all  that  is  used  to  bind  the  bargain.  The 
infractions  of  the  rules  are  very  few,  so  few  in  fact 
that  it  may  fairly  be  said  that  no  more  honorable 
body  of  men  exists  anywhere  in  the  world. 

The  purposes  of  the  Exchange  are  denoted  in  the 
words  of  its  first  article: 

"Its  object  shall  be  to  furnish  exchange  rooms  and 
other  facilities  for  the  convenient  transaction  of  their 


STOCK  EXCHANGE  LAWS 

business  by  its  members,  as  brokers;  to  maintain  high 
standards  of  commercial  honor  and  integrity  among  its 
members;  and  to  promote  and  inculcate  just  and  equi- 
table principles  of  trade  and  business." 

The  solicitude  of  the  Exchange  to  maintain  the  high 
standard  set  by  this  article  is  manifest  from,  among 
others,  the  disciplinary  provisions  of  the  Constitution 
which  follow,  as  well  as  from  those  creating  safeguards 
against  members  deemed  insolvent.1 

'The  rules  of  a  Stock  Exchange  or  Board  of  Trade,  as  between  the 
members,  have  the  force  and  effect  of  existing  laws.     Contracts  are 
governed  by  the  rules  in  force  at  the  time  the  contracts  are  made. 
Hess  Malting  Co.,  v.  Warren,  15  111.  App.  507. 
Thorne  v.  Prentiss,  83  111.  99. 
Paton  v.  Newman,  51  La.  Ann.  1428. 
Pacaud  v.  Waite,  218  111.  138. 

Nat.  League  of  Comn.  Merchts.  v.  Hornung,  148  App.  Div.  355. 
Haight  v.  Dickerman,  18  N.  Y.  Supp.  559. 

By  becoming  members,  the  members  impliedly  agree  to  be  bound 
by  the  rules. 

People  v.  Board  of  Trade,  45  111.  112. 
Board  of  Trade  v.  Nelson,  162  111.  431. 

The  constitution  and  by-laws  constitute  a  law  which  the  members  have 
established  for  themselves.     "The  very  existence  of  this  body  depends 
upon  the  faithful  observance  of  its  organic  law  by  all  its  members." 
White  v.  Brownell,  2  Daly,  329,  338. 
Weston  v.  Ives,  97  N.  Y.  222. 
To  the  same  effect: 

Thompson   v.   Adams,   93    Pa.    St.    55    (Philadelphia   Board  of 

Brokers). 

The  contracts  may  be  made  with  specific  reference  to  the  rules. 
Albers  Commission  Co.  v.  Spencer,  205  Mo.  105. 
Bassett  v.  Irons,  8  Mo.  App.  127. 

In  a  suit  between  members  of  the  New  York  Stock  Exchange  it  was 
held  that  the  parties  were  bound  by  the  constitution  and  by-laws  of  the 
association,  and  that  by-laws  prescribing  the  mode  of  performing  con- 
tracts of  the  kind  in  question  became  part  of  the  contract.  Peabody 
v.  Speyers,  56  N.  Y.  230.  And  parties  outside  of  the  board  of  the  Gold 
Exchange  may  agree  to  be  governed,  in  regard  to  their  contract,  by 
rules  which,  by  their  terms,  are  expressly  confined  to  contracts  made  at 
the  board.  Mills  v.  Gould,  42  N.  Y.  Super.  Ct.  119. 

But,  while  the  association  may  adopt  rules  obligatory  on  its  own 


THE  EXCHANGE  AND  ITS  CONSTITUTION 

The  Governing  Committee. 

The  government  of  the  Exchange  is  vested  in  a  Gov- 
erning Committee,  composed  of  the  President  and  Trea- 

members,  by  which  their  rights  may  be  summarily  determined  between 
themselves,  such  determination  has  no  force  to  injure  or  impair  the 
rights  of  outside  persons  not  voluntarily  subject  to  the  jurisdiction  of 
the  tribunal. 

Morris  v.  Grant,  34  Hun.  377. 

See  also  Waugh  v.  Seaboard  Bank,  54  N.   Y.     Super.   Ct.   283 

(Petroleum  Exchange) . 

Stock  exchanges  have  power  to  enact  such  rules  and  regulations  as  are 
necessary  to  carry  out  their  purposes,  if  not  contrary  to  the  law  of  the  land. 

Cohen  v.  Budd,  52  Misc.  217. 

By-laws  should  be  strictly  construed  and  should  not  be  extended  by 
implication  so  as  to  effect  a  forfeiture  of  membership. 

Albers  v.  Merchants'  Exchange,  140  Mo.  App.  446. 
The  Open  Board  of  Stockbrokers,  organized  in  1864  and  consolidated 
with  the  N.  Y.  Stock   Exchange  in  1869,  was  described  in  White  v. 
Brownell,  2  Daly,  329,  355,  as  "an  association  of   persons   engaged 
in  the  same  kind  of  business,  who  have  organized  together  for  the  pur- 
pose of  establishing  certain  rules,  by  which  each  agrees  to  be  governed 
in  the  conduct  and  management  of  his  separate  transactions  or  business." 
A  member  admitted  in  subordination  to  existing  rules  is  estopped  from 
denying  their  reasonableness. 

Bostedo  v.  Board  of  Trade,  130  111.  App.  560. 
The  courts  will  construe  such  rules.     In  re  Fisk  &  Robinson,  185 
Fed.  974. 

But  they  will  not  interfere  to  control  the  enforcement  of  reasonable 
by-laws,  which  infringe  no  rule  of  law  or  public  policy. 
Green  v.  Board  of  Trade,  174  111.  585. 
Board  of  Trade  v.  Nelson,  162  111.    431 
Board  of  Trade  v.  Weare,  105  111.  App.  289. 

A  by-law  is  not  invalid  merely  because  it  is  different  from  the  common 
law  rule,  if  it  is  not  against  the  policy  of  the  law. 

Goddard  v.  Merchants'  Exchange,  9  Mo.  App.  290. 
A  by-law  providing  for  the  suspension  of  a  member  for  dishonorable 
conduct  has  been  held  valid. 

Board  of  Trade  v.  Nelson,  162  111.  431. 

A  by-law  of  an  Exchange  that  if  a  member   fails  to  comply  with  a 
business  contract  made  with  another  member  he  shall  be  expelled  is  valid. 
People  v.  Board  of  Trade,  45  111.  112. 
Board  of  Trade  v.  Nelson,  162  111.  431. 

A  by-law  prohibiting  the  representation  of  parties  by  professional 
counsel  in  investigations  before  committees  has  been  held  reasonable 
and  enforceable. 

Green  y,  Board  of  Trade,  174  111.  585. 


STOCK  EXCHANGE  LAWS 

surer  of  the  Exchange,  and  of  forty  members.1  This 
committee  is  divided  into  four  classes  of  ten  members 
each,  each  class  holding  office  for  four  years,  but  the  ex- 
piration of  the  term  of  each  class  is  so  arranged  that 
one  class  goes  out  of  office  each  year.2  It  has  power  to 
determine  the  manner  and  form  of  its  own  proceedings; 
to  appoint  and  dissolve  all  committees;  define,  alter  and 
regulate  their  jurisdiction;  direct  and  control  their  pro- 
ceedings; try  and  punish  members;  control  finances;  com- 
pensate officers;  and  all  other  powers  necessary  or  in- 
cidental to  the  proper  regulation  of  business,3  but  no 
member  may  participate  in  the  adjudication  of  any  case 
in  which  he  is  personally  interested.4 

This  committee  may  also  choose  an  acting  President 
in  the  absence  of  the  President  and  Vice-President;  and 
it  may  choose  counsel  each  year. 

Officers  of  the  Exchange,  Their  Powers  and  Duties. 

The  President  may  call  special  meetings  of  the  Ex- 
change and  the  Governing  Committee,  and  must  call 
such  special  meetings  on  the  written  request  of  one 
hundred  members  and  of  the  Governing  Committee 
on  the  written  request  of  ten  committee  members.5 
He  may  appoint  committees  ad  interim.6 

The  Vice-President,  who  is  chosen  by  the  Govern- 

iArt.  II. 

'Art.  Ill,  Sec.  i. 
•Art.  Ill,  Sec.  2. 
4Art.  Ill,  Sec.  4. 
'Art  IV,  Sec.  2. 
•Art.  IV,  Sec.  3. 


THE  EXCHANGE  AND  ITS  CONSTITUTION 

ing  Committee  each  year,  assumes  the  powers  and  duties 
of  the  President  in  his  absence.1 

The  Treasurer  acts  under  the  Finance  Committee, 
which  may  appoint  one  of  its  members  to  act,  with 
either  the  President  or  Vice-President,  as  Treasurer 
pro  tern? 

The  Secretary  is  appointed  by  majority  vote  of  the 
Governing  Committee.3 

The  Chairman  is  appointed  by  the  Governing  Com- 
mittee. His  duty  is  to  preside  over  the  Exchange  during 
business  hours,  maintain  order,  enforce  the  rules,  im- 
pose fines,  etc.,  under  the  direction  of  the  Committee 
of  Arrangements.4  He  is  not  allowed  personally  to  buy 
or  sell  securities  upon  the  floor  of  the  Exchange.5 

The  Assistant  Chairman  is  appointed  by  and  acts 
under  the  direction  of  the  Committee  of  Arrangements.6 

The  Governing  Committee  may  for  any  good  cause 
remove  officers  by  two-thirds  vote  of  its  members.7 

Committees. 

There  are  twelve  standing  Committees: 
First:    A    Committee    of   Arrangements,    consisting 
of  seven  members,  to  which  is  entrusted  the  general 
care  and  supervision  of  the  Exchange,  the  enforcement 

•Art.  V. 

*Art.  VI. 

•Art.  VII. 

•Art.  VIII,  Sec.  i. 

•Art.  VIII,  Sec.  2. 

•Art.  VIII,  Sec.  3. 

'Art.  X,  Sec.  3. 


STOCK  EXCHANGE  LAWS 

of  the  rules  for  conduct  of  business,  etc.;  the  control 
and  regulation  of  quotation  service  and  telephone  and 
telegraph  connection  with  the  Exchange,  the  appoint- 
ment of  employees,  etc. l 

Second:  A  Committee  on  Admissions,  consisting  of 
fifteen  members,  whose  duty  it  is  to  consider  applica- 
tions for  membership  and  reinstatements.  Re-admission 
or  reinstatement  may  be  had  upon  the  consent  of  two- 
thirds  of  the  members  of  the  Governing  Committee 
present  when  the  application  therefor  is  considered.2 

Third:  An  Arbitration  Committee  of  nine  members. 
They  investigate  and  decide  all  claims  and  differences 
arising  from  contracts  subject  to  the  rules  of  the  Ex- 
change, between  members  or  at  the  instance  of  a  non- 
member  between  members  and  non-members.  Their 
decision  is  final,  unless  an  appeal  is  taken  by  a  member 
of  the  committee,  or  the  case  involves  $2,500  or  more, 
in  which  case  either  party  may  appeal  within  ten  days 
to  the  Governing  Committee.  A  non-member,  making 
a  claim,  must  execute  an  agreement  to  abide  by  the  rules 
of  the  Exchange,  and  execute  a  full  release  of  his  claims, 
the  latter  to  be  delivered  to  the  defendant  or  cancelled 
and  returned  according  to  the  result  of  the  proceedings.3 

'Art.  XI. 

'The  Committee  on  Admissions  is  a  court  of  special  or  inferior  juris- 
diction.    Its  jurisdiction  must  be  shown.     It  is  not  presumed. 

Matter  of  Seymour,  Johnson  &  Co.,  37  Misc.  264,  274. 
"'All  claims"  here  referred  to  are   only  those  which  invoke  Stock 
Exchange  transactions. 

Bernheim  v.  Keppler,  34  Misc.  321,  325. 
The  real  parties  to  an  arbitration  are  entitled  to  notice  and  hearing. 

Morris  v.  Grant,  34  Hun,  377. 

In  Heath  v.  President  of  Gold  Exchange,  7  Abb.  Pr.  N.  S.  251,  it 
was  held  that  the  most  that  could  possibly  he  claimed  for  the  arbitra- 


THE  EXCHANGE  AND  ITS  CONSTITUTION 

Fourth:  A  Committee  on  Business  Conduct,  of  five 
members,  whose  duty  it  is  to  consider  matters  relating 
to  the  business  conduct  of  members  with  respect  to  cus- 
tomers' accounts,  and  to  keep  in  touch  with  the  course 
of  prices  of  securities  listed  on  the  Exchange,  with  the 


tion  clause  was  that  it  should  have  the  same  force  and  effect  as  an  agree- 
ment in  writing,  made  by  persons,  to  submit  to  the  decision  of  one  or 
more  arbitrators  any  controversy  existing  between  them.  Such  agree- 
ments, until  an  award  has  been  made,  are  not  binding  on  the  parties. 
The  N.  Y.  Rev.  St.  (2  Rev.  St.  544,  Sec.  23)  permitted  a  party  to  revoke 
the  powers  of  the  arbitrators  at  any  time  before  the  cause  is  finally  sub- 
mitted to  them  for  their  decision.  The  court,  citing  cases,  said  the 
section  seemed  to  apply  to  all  cases  of  submission. 

A  by-law,  providing  for  arbitration  of  business  disputes,  provided  for 
suspension  for  refusal  to  submit  them  after  due  notification,  and  for 
expulsion  after  a  hearing,  if  the  gravity  of  the  offense  was  deemed  to 
merit  it.  The  by-law  was  held  valid. 

Evans  v.  Chamber  of  Commerce,  86  Minn.  448. 
Where  a  board  provides  a  tribunal,  a  member  cannot  invoke  a  court 
of  equity  without  first  having  recourse  to  the  tribunal,  unless,  by  fraud 
or  otherwise,  it  refuses  to  move  to  a  determination. 

Pacaud  v.  Waite,  218  111.  138. 

Aside  from  the  question  of  validity  of  such  a  rule  a  member  who  vol- 
untarily submits  claims  against  him  to  the  arbitration  committee  of  an 
association  and  takes  two  successive  appeals  from  the  decision  against 
him  assents  to  the  jurisdiction  and  cannot  afterwards  question  it  in  a 
court  of  law. 

Nat.  League  of  Com.  Merchts.  v.  Hornung,  148  App.  Div.  355. 
The  award  of  arbitrators,  within  their  jurisdiction,  is  binding  upon  the 
parties.     The  courts  will  not  disturb  it  for  errors  of  judgment  merely, 
though  they  will  for  exceeding  the  jurisdiction. 

Bartlett  v.  Bartlett  &  Son  Co.,  116  Wis.  450. 

The  decision  of  an  arbitration  committee  composed  of  interested 
persons  should  not  be  allowed  to  stand.  In  such  a  case  the  members 
should  be  sent  to  the  courts  to  determine  the  controversy. 

Moffatt  v.  Board  of  Trade  (Mo.)  in  S.  W.  894. 
The  omission  of  arbitrators  to  be  sworn  (N.  Y.  Prod.  Exch.)  may  be 
waived  by  appearing  before  them  and  arguing  the  case  without  inter- 
posing objections. 

Sonneborn  v.  Lavarello,  2  Hun,  201. 

An  exchange  has  a  right  to  try  and  discipline  a  member  for  action 
inconsistent  with  just  and  equitable  principles  of  trade  in  failing  to 
comply  with  a  contract  made  by  him  outside  of  and  not  upon  the  floor 
of  the  exchange. 


STOCK  EXCHANGE  LAWS 

view  of  determining  when  improper  transactions  are 
being  resorted  to.1 

Fifth:  A  Committee  on  Clearing-House,  of  five 
members,  which  has  general  charge  of  the  Clearing- 
House  of  the  Exchange  and  its  business,  and  designates 
the  securities  to  be  cleared. 

Sixth:  A  Committee  on  Commissions,  of  five  mem- 
bers, which  enforces  the  rules  relating  to  commissions, 
partnerships  and  branch  offices,  and  reports  to  the 
Governing  Committee  violations  thereof  or  any  un- 
desirable partnership  or  branch  office. 

Seventh :  A  Committee  on  Constitution,  of  five  mem- 
bers, which  considers  all  additions,  alterations  or  amend- 
ments to  the  constitution. 

Eighth:  A  Finance  Committee,  of  seven  members, 
which  acts  as  a  Board  of  Audit  and  examines  the  condi- 
tion of  the  Gratuity  Fund. 

Ninth :  A  Committee  on  Insolvencies,  of  three  mem- 
bers selected  from  the  Committee  on  Admissions,  which 
investigates  every  case  of  insolvency  immediately  after 


In  re  Haebler  tf.  N.  Y.  Prod.  Exch.  149  N.  Y.  414. 
The  fact  that  the  board  of  managers  of  an  exchange  has  power  only 
to  discipline  when  the  member  refuses  to  arbitrate  or  conciliate  does 
not  make  the  by-law  unreasonable,coercive  or  contrary  to  public  policy. 

In  re  Haebler  v.  N.  Y.  Prod.  Exch.  149  N.  Y.  414. 
An  offer  to  arbitrate  before  another  Exchange  or  before  non-members 
is  not  sufficient  to  prevent  trial  and  discipline. 

In  re  Haebler  v.  N.  Y.  Prod.  Exch.  149  N.  Y.  414. 
iResolution  of  March  5,  1913.  This  is  entirely  new  and  seems  to  be 
the  last  word  in  control  of  members  by  the  Governing  Committee  of 
the  Exchange.  The  most  rigid  and  searching  inquiry  has  been  made  by 
this  committee  into  various  transactions  of  members,  with  instant 
beneficial  results.  Because  of  its  activities  it  has  been  dubbed  "The 
Police  Committee." 

8 


THE  EXCHANGE  AND  ITS  CONSTITUTION 

its  announcement,  and  reports  to  the  Committee  on 
Admissions. 

Tenth:  A  Law  Committee,  of  five  members,  which 
considers  all  questions  of  law  affecting  the  interests  of 
the  Exchange,  and  is  empowered  to  examine  into  the 
dealings  of  any  member. 

Eleventh:  A  Committee  on  Securities,  of  five  mem- 
bers, which  makes  rules  defining  the  requirements  for 
regularity  in  the  delivery  of  securities  dealt  in  on  the 
Exchange,  and  decides  all  questions  relating  to  the 
settlement  of  contracts,  subject  to  the  rules  of  the  Ex- 
change, or  to  deliveries  thereof,  and  all  questions  relat- 
ing to  reclamations  therefor.1 

Twelfth:  A  Committee  on  Stock-List,  of  five  mem- 
bers, which  considers  applications  for  placing  securities 
upon  the  Exchange  list  and  reports  to  the  Governing 
Committee,  giving  a  full  statement  as  to  the  organi- 
zation, capitalization,  resources,  and  indebtedness  of  the 
applicant.  It  is  empowered  to  place  upon  and  remove 
from  the  list,  without  report,  Government  and  State  or 
City  obligations  and  subscription  receipts.  It  has  charge 
of  the  arrangement  and  revision  of  the  list  of  securities.  It 
is  one  of  the  most  important  committees  of  the  Exchange, 


iThe  committee's  jurisdiction  of  all  questions  "as  to  the  regularity 
of  stock  certificates,  bonds,  etc.  .  .  .  dealt  in  at  the  Exchange" 
embraces  questions  as  to  the  regularity  of  the  form  of  bonds;  regularity 
of  issue,  which  includes  genuineness;  regularity  as  to  being  within 
the  list  of  admissions  to  the  board,  and  questions  of  that  nature;  but 
the  committee  has  nothing  to  do  with  the  legality  of  a  tender  or  delivery 
of  bonds  conceded  to  be  regular  in  all  those  respects,  but  refused  or  ob- 
jected to  on  some  ground  not  available  against  a  bona  fide  holder  for 
value. 

Morris  v.  Grant,  34  Hun,  377. 


STOCK  EXCHANGE  LAWS 

and  exercises  its  power  in  a  most  wholesome  and  bene- 
ficial way.  It  is  constantly  obtaining  details  and  report 
of  corporations  whose  shares  find  a  market  on  the  Ex- 
change and  is  thus  in  a  position  to  keep  all  persons  in- 
formed as  to  the  general  character,  conditions  and  per- 
haps dealings  of  any  of  the  companies  whose  names 
appear  on  the  stock  list.1 

Appeals. 

The  constitution  also  provides  for  appeals  from  the 
decision  of  standing  committees  to  the  Governing 
Committee.2 

Admission  to  Membership. 

Every  applicant  for  membership  in  the  Exchange  must 
be  twenty-one  years  of  age  and  a  citizen  of  the  United 
States.3 

There  is  no  constitutional  limit  as  to  the  number 
of  members,  but  it  can  only  be  increased  by  the  action 
of  the  Governing  Committee,  which  must  prescribe 
the  number  and  terms  of  admission.  This  action  must 
be  submitted  to  the  Exchange  in  the  same  way  as  an 
amendment  to  the  constitution.4 

The  initiation  feeon  atransferof  membership  is  $2, ooo,5 
payable  on  the  day  of  applicant's  election.6 

iln  England,  the  Companies  (Consolidation)  Act  of  1908  provides  by 
statute  for  the  collection  of  the  information  gathered  by  this  committee. 

'Art.  XII. 

'Art.  XIII,  Sec.  i. 

4Art.  XIII,  Sec.  2. 

The  present  limit  of  membership  is  eleven  hundred.  Of  these  only 
about  six  hundred  are  active  upon  the  floor  of  the  Exchange. 

'Art.  XIII,  Sec.  3. 

•Art.  XIII,  Sec.  4. 

IO 


THE  EXCHANGE  AND  ITS  CONSTITUTION 

Before  admission  to  the  privileges  of  membership, 
the  person  elected  must  sign  the  constitution.  By  such 
signature  he  pledges  himself  to  abide  by  the  same  and 
by  all  subsequent  amendments.1 

Dues  and  Fines. 

The  Exchange  is  supported  by  dues  of  $100  per  year, 
payable  semi-annually.2 

If  in  arrears  for  three  months  a  member  may  be  sus- 
pended. If  dues  are  not  paid  at  the  end  of  one  year,  the 
Committee  on  Admissions  is  authorized  to  dispose  of 
the  membership.3 

Transfer  of  Membership. 

Transfer  of  membership  is  made  on  approval  of  two- 
thirds  of  the  Committee  on  Admissions.  Notice  of  the 
proposed  transfer  must  be  posted  on  the  bulletin  ten 
days  prior  to  transfer.4 

iArt.  XIII,  Sec.  5. 
•Art.  XIV,  Sec.  i. 

'Art.  XIV,  Sec.  2. 

A  member  of  a  voluntary  unincorporated  exchange,  who  was  illegally 
expelled  for  failing  to  pay  dues,  is  bound,  within  a  reasonable  time 
after  obtaining  knowledge  of  his  expulsion,  to  assert  his  rights;  other- 
wise, he  will  be  deemed  to  have  assented  to  the  expulsion. 

Konta  v.  St.  Louis  Stock  Exchange,  189  Mo.  26  (where  a  member  of 
the  St.  Louis  St.  Exch.  was  expelled  when  memberships  therein  were 
worthless.  He  waited  over  a  year,  when  a  membership  was  worth 
$7,500,  before  attempting  to  assert  his  rights). 

'Art.  XV,  Sec.  i. 

A  seat  on  the  N.  Y.  Stock  Exchange  is  property  within  the  meaning 
of  the  Tax  Law  (then  L.  1896,  ch.  908,  Art.  10),  and  subject  to  the  in- 
heritance transfer  tax  prescribed  by  Article  10  of  the  Tax  Law,  upon  the 
death  of  the  owner  and  its  devolution  to  his  personal  representatives, 
Matter  of  Hellman,  174  N.  Y.  254. 

II 


All  contracts  subject  to  the  rules  of  the  Exchange  made 
by  a  member  proposing  to  transfer  his  seat  mature  on 

But  it  is  not  personal  property  within  Sec.  2,  subd.  4,  of  that  Tax  Law, 
and  is  not  subject  to  the  annual  tax  thereunder. 

People  v.  Feitner,  167  N.  Y.  i. 
A  seat  is  not  a  "personal  privilege"  merely. 

In  re  Hurlbutt,  Hatch  &  Co.,  135  Fed.  504,  507,  following  Spar- 
hawk  v.  Yerkes,  142  U.S.  i. 

The  Stock  Exchange  cannot  be  compelled  to  admit  to  membership 
the  purchaser  of  a  seat,  and  a  purchaser  who  is  admitted  takes  the  seat 
subject  to  the  constitution  and  rules  of  the  Exchange. 

Hyde  v.  Woods,  94  U.  S.  523  (San  Francisco  St.  Exch.);  Page  v. 
Edmunds,  187  U.  S.  596;  People  v.  Feitner,  167  N.  Y.  i;  In 
re  Hayes,  75  N.  Y.  Supp.  312,  321. 

A  membership  in  the  N.  Y.  Stock  Exchange  can  only  be  transferred 
under  the  rules  of  the  Exchange  and  by  consent  of  the  Committee  on 
Admissions. 

O'Dell  v.  Boyden  (C.  C.  A.),  150  Fed.  731. 

A  seat  cannot  be  transferred  without  the  consent  of  the  association, 
and  a  forced  sale  of  the  seat  would  not  give  the  purchaser  the  right  to 
occupy  the  seat. 

Shannon  v.  Cheny,  156  Cal.  567. 

There  can  be  no  sale  of  a  seat  except  in  subordination  to  the  rules  of 
the  Exchange.     The  privilege  of  transacting  business  on  the  Exchange 
has  been  denned  as  "a  personal  privilege  of  being  and  remaining  a  member 
of  a  voluntary  association  with  the  assent  of  the  association." 
Lowenberg  v.  Greenbaum,  99  Cal.  162. 
Shannon  v.  Cheney,  156  Cal.  567. 

On  the  insolvency  of  a  firm  one  of  whose  partners  is  a  member  of  the 
Exchange,  the  membership  passes  to  the  assignee  in  bankruptcy.     The 
fact  that  the  Stock  Exchange  continues  to  regard  the  insolvent  member  as 
a  member  in  no  way  injures  the  assignee,  and  an  action  by  him  to  re- 
strain the  insolvent  member  from  using  the  seat  and  to  compel  him  to 
assign  and  transfer  it  to  the  plaintiff  is  unnecessary. 
Platt  v.  Jones,  96  N.  Y.  24. 
McCabe  v.  Lawrence,  51  N.  Y.  Super.  Ct.  219. 
In  re  Hurlbutt,  Hatch  &  Co.  (C.  C.  A.),  135  Fed.  504. 
Similarly,  a  purchaser  from  the  trustee  is  in  a  position  to  apply  to 
the  Exchange  to  have  his  rights  recognized,  either  in  his  own  person,  or 
he  may  apply  to  have  another  person  accepted  as  a  member.    The 
recognition  of  another  person  by  the  Exchange  as  a  member  entitled  to 
the  seat  through  transfer  by  the  insolvent  member  after  his  assignment 
is  no  bar  to  his  application,  which  is  his  first  step,  and  injunctive  relief 
before  wrongful  refusal  of  the  Exchange  to  admit  him  will  be  denied  him. 

McCabe  v.  Emmons,  51  N.  Y.  Super.  Ct.  219. 

A  right  of  transfer  of  the  seat  of  a  bankrupt  member  of  the  Philadel- 
phia Stock  Exchange  passes  to  his  trustee  in  bankruptcy,  the  bankrupt 

12 


THE  EXCHANGE  AND  ITS  CONSTITUTION 

the  tenth  day  of  posting  of  notice;  no  further  con- 
tracts may  be  made  by  him  pending  approval  by  the 
committee.  This  rule  also  applies  to  cases  where  a 

having  no  unsettled  accounts  with  members  of  the  exchange  at  the  time 
of  filing  his  petition  in  bankruptcy;  and  the  trustee  is  entitled  to  sell  the 
seat  as  part  of  the  bankrupt's  assets.  This  right  is  subject  to  the  ap- 
proval by  the  proper  authorities  of  the  Exchange  to  the  transfer  to  any 
given  person. 

In  re  Page  (C.  C.  A.),  107  Fed.  89. 

The  bankruptcy  court  may  compel  the  member  to  execute  a  transfer 
of  the  seat  to  his  firm's  assignee  in  bankruptcy. 

In  re  Hurlbutt,  Hatch  &  Co.  (C.  C.  A.),  135  Fed.  504. 

A  membership  in  the  Exchange  has  a  pecuniary  value,  constituting 
property,  to  which  an  equitable  right  may  be  given  by  an  assignment. 
But  it  cannot  in  fact  be  transferred  except  by  the  substitution  of  a 
new  member  in  accordance  with  the  rules  of  the  Exchange.  Therefore, 
on  the  bankruptcy  of  a  member,  his  membership  passes  into  the  pos- 
session of  his  trustee  as  assets  of  his  estate,  notwithstanding  any  pre- 
vious assignment,  although  it  may  be  subject  to  the  equities  of  the  as- 
signee and  its  transfer  and  conversion  into  money  can  then  only  be 
effected  pursuant  to  orders  of  the  bankruptcy  court. 
O'Dell  v.  Boyden  (C.  C.  A),  150  Fed.  731. 

"There  may  be  property  belonging  to  this  body,  derived  from  the  pay- 
ment of  dues  or  fines,  or  consisting  of  the  furniture  of  the  room  where  the 
board  meets;  but  the  possession  of  it  is  a  mere  incident,  and  not  the 
main  purpose  or  object  of  the  association.  A  member  has  no  proprietary 
interest  in  it,  or  a  right  to  any  proportionable  part  of  it  upon  withdraw- 
ing. He  has  merely  the  enjoyment  and  use  of  it  while  he  is  a  member, 
but  the  property  remains  with  and  belongs  to  the  body  while  it  continues 
to  exist." 

White  v.  Brownell,  2  Daly,  329,  356. 

A  seat  or  membership  in  the  N.  Y.  Stock  Exchange  undoubtedly  is 
property  for  certain  purposes,  but  even  then  it  is  property  of  a  peculiar 
nature. 

McCabe  v.  Emmons,  51  N.  Y.  Super.  Ct.  219,  225. 

A  seat  in  the  Philadelphia  Board  of  Brokers  is  not  property  in  the 
eye  of  the  law,  and  cannot  be  seized  in  execution  for  debts  of  the  members. 
Thompson  v.  Adams,  93  Pa.  St.  55. 

A  membership  in  the  N.  Y.  Stock  Exchange  is  personal  to  the  holder, 
and  is  evidenced  by  no  certificate. 

O'Dell  v.  Boyden,  (C.  C.  A.)  150  Fed.  731. 

A  seat  on  the  Boston  Stock  Exchange  may  be  pledged  for  indebt- 
edness. 

Nashua  Savings  Bank  v.  Abbott,  181  Mass.  531. 

This  is  due  to  a  specific  rule  to  that  effect,  and  in  this  regard  the  Boston 
Stock  Exchange  differs  from  the  N.  Y.  Stock  Exchange. 

13 


STOCK  EXCHANGE  LAWS 

membership    is    disposed    of    by    the    Committee    01: 
Admissions.1 

Upon  transfer  voluntarily  or  by  disposition  of  the 
Governing  Committee  or  the  Committee  on  Admissions, 
the  proceeds  thereof  are  applied  in  the  following  order: 

1.  Payment  of  all  fines,  dues,  assessments,  and  charges 
of  the  Exchange  against  the  transferor. 

2.  Payment  of  creditors,  members  of  the  Exchange, 
or  firms  registered  thereon,  of  all  filed  claims  arising 
from  contracts  subject  to  the  rules  of  the  Exchange,  as 
allowed  by  the  Committee  on  Admissions.     If  insufficient 
to  pay  claims  allowed  in  full,  the  proceeds  are  applied 
pro  rata. 

3.  The   surplus,  if  any,  is  paid  to  the  transferor  or 
to  his  legal  representatives  on  the  execution  of  a  release.2 

All  unmatured  debts  or  other  obligations,  arising  out 
of  contracts  subject  to  the  rules  of  the  Exchange,  be- 
come due  and  payable,  immediately  prior  to  the  transfer.3 


A  Stock  Exchange  seat  is  not  such  a  collateral  as  may  be  sold  by  the 
pledgee.  The  way  in  which  it  could  be  accomplished  would  be  to  report 
the  failurfe  of  the  member  to  meet  his  obligations  to  the  Stock  Exchange, 
whereupon  he  might  be  suspended  for  a  year  and  for  such  further  time 
as  the  governing  board  in  its  discretion  might  give.  The  seat  cannot 
be  sold  by  individuals.  It  is  not  transferable  like  a  stock  or  bond; 
membership  in  the  Exchange  is  the  right  to  participate  as  a  member  in  a 
voluntary  private  organization.  The  courts  cannot  force  a  person 
upon  the  Exchange. 

Ketcham  v.  Provost,  141  N.  Y.  Supp.  437. 

'Art.  XV,  Sec.  2. 

'Art.  XV,  Sec.  3. 

'Art.  XV,  Sec.  4. 

"All  contracts,  debts,  etc.,  shall  become  due  and,  payable,"  means  cur- 
rent contracts,  debts,  or  obligations  between  members,  and  originating 
between  them  in  their  membership  capacity.  Claims  long  since  accrued 
would  not,  first,  have  to  be  declared  due  and  payable. 

14 


THE  EXCHANGE  AND  ITS  CONSTITUTION 

A  member  forfeits  all  right  to  share  in  the  proceeds 
of  a  membership  by  failing  to  file  claim  prior  to  the 
transfer,  subject  to  his  right  to  be  paid  out  of  any  sur- 

Bernheim  v.  Keppler,  34  Misc.  321,  324. 

Cochran  v.  Adams,  180  Pa.  St.  289,  is  to  the  same  effect. 
Construing  this  article  it  was  held  that  the  present  Article  XV,  Sec. 
7,  relating  to  the  disposition  by  the  Committee  on  Admissions  of  a  seat 
on  death,  and  Article  XV,  Sec.  3,  relating  to  the  disposition  of  the  pro- 
ceeds of  a  seat  whether  transferred  voluntarily  or  by  the  Exchange, 
appear  to  cover  the  former  Section  4  of  Article  13. 

Claims  of  members  of  the  Exchange  mean  claims  arising  from  trans- 
actions between  members  as  such,  and  do  not  include  a  claim  arising 
out  of  a  transaction  between  the  claimant  and  the  deceased  member 
prior  to  the  latter's  admission  to  membership  in  the  Exchange. 

Bernheim  v.  Keppler,  34  Misc.  321. 

See  also  Cochran  v.  Adams,  180  Pa.  St.  289. 

A  general  assignment  by  an  insolvent  member  does  not  affect  the 
contractual  rights  of  members  of  the  Exchange  in  the  seat.  Dividends 
paid  them  out  of  the  sale  of  the  seat  are  not  to  be  deducted  in  estimating 
their  right  to  dividends  out  of  the  assigned  estate. 

In  re  Hayes,  75  N.  Y.  Supp.  312. 

A  member  suspended  for  insolvency  transferred  his  membership 
in  blank  to  the  Committee  on  Admissions,  who  sold  it.  The  proceeds 
of  the  seat,  notwithstanding  the  prior  general  assignment  made  by 
the  member's  firm,  were  primarily  liable  for  the  payment  of  the  debts 
contracted  by  him  and  it  to  members  of  the  Exchange,  and  also  for  such 
debts  due  to  the  firms  of  members  of  the  Exchange. 

In  re  Hayes,  75  N.  Y.  Supp.  312. 

The  court  observed  that  in  respect  of  the  facts  of  the  case,  the  con- 
stitution was  ambiguous  in  not  expressly  providing  for  the  distribution 
of  the  proceeds  of  the  membership  of  a  member  suspended  for  insol- 
vency, who  voluntarily  agreed  to  transfer  his  membership  (p.  316).  It 
was  held  that  usage  might  be  proven  to  give  the  effect  intended,  where  a 
debt  was  due  to  a  member's  firm. 

In  re  Hayes,  75  N.  Y.  Supp.  312. 

A  rule  of  an  Exchange  providing  that  claims  due  to  members  from  a 
defaulting  member  may  be  collected  by  an  Exchange  and  applied  to 
debts  due  other  members  is  invalid,  as  in  violation  of  the  bankruptcy 
law. 

Cohen  v.  Budd,  52  Misc.  217.  (Consol.  St.  Exch.) 
A.,  not  a  member,  furnished  the  money  with  which  R.  became  a 
member  of  the  Philadelphia  Board  of  Brokers.  R.  died.  A.  claimed 
that  he  was  the  equitable  owner  of  the  seat  and  entitled  to  the  proceeds 
in  preference  to  debts  due  by  R.  to  other  members  of  the  Exchange.  A.'s 
claim  was  denied,  he  being  an  entire  stranger,  unknown  to  the  board. 

Thompson  v.  Adams,  93  Pa.  St.  55. 

15 


STOCK  EXCHANGE  LAWS 

plus  after  all  other  claims  allowed  have  been  paid  in 
full.1 

Claims  between  partners,  members  of  the  Exchange, 
do  not  share  in  the  proceeds  of  the  membership  of  one 
of  the  partners  until  after  all  other  claims  allowed  are 
paid  in  full.2 

The  membership  of  a  deceased  member  is  disposed 
of  by  the  Committee  on  Admissions.3 


A  member  suspended  for  insolvency,  who  did  not  settle  within  one 
year,  voluntarily  transferred  his  membership,  in  blank,  to  the  Com- 
mittee on  Admissions,  which  sold  it.  Notwithstanding  a  prior  assign- 
ment by  the  member's  firm  the  proceeds  were  held  primarily  applicable 
to  the  payment  of  debts  to»members  and  their  firms  arising  from  trans- 
actions within  the  Exchange. 

Matter  of  Seymour,  Johnson  &  Co.,  37  Misc.  264. 

iArt.  XV,  Sec.  5. 

'Art.  XV,  Sec.  6. 

•Art.  XV,  Sec.  7. 

The  claims  of  members  that  are  to  be  satisfied  out  of  proceeds  of  the 
sale  of  a  decedent's  seat  are  claims  between  members  arising  on  the  floor 
of  the  Exchange,  and  do  not  include  a  claim  arising  out  of  transactions 
had  with  a  non-member  who  afterwards  became  a  member. 
Bernheim  v.  Keppler,  34  Misc.  321. 

A  creditor  member  is  entitled,  besides  the  receipt  of  dividends  out 
of  the  sale  of  a  membership,  to  prove,  as  against  mere  general  creditors, 
for  the  whole  of  his  original  claim,  provided  he  does  not  receive  more 
than  his  full  claim. 

Matter  of  Seymour,  Johnson  &  Co.,  37  Misc.  264. 

Persons  having  claims  against  a  member  or  ex-member  of  the  Exchange 
who  might  submit  the  same  to  the  Committee  on  Admissions  pursuant 
to  the  constitution  may  be  precluded  from  doing  so  by  their  own  acts 
or  omissions,  and  may  be  enjoined  from  so  doing  by  a  court  of  com- 
petent jurisdiction. 

In  re  Currie  (C.  C.  A.),  185  Fed.  263. 
O'Dell  v.  Boyden  (C.  C.  A.),  150  Fed.  731. 

Bankruptcy  proceedings  were  instituted  in  Michigan  against  a  member 
of  the  New  York  Stock  Exchange.  The  bankrupt  was  indebted  to  Hay- 
den,  Stone  &  Co.  in  an  amount  secured  by  pledged  collateral.  How 
much  of  the  collateral  would  be  available  to  them  was  doubt- 
ful. The  trustee  in  bankruptcy  took  proceedings  to  compel  the  Stock 
Exchange  to  pay  over  to  him  the  proceeds  of  the  sale  of  the  seat.  Hay- 
den,  Stone  &  Co.  had  propounded  their  demand  to  as  much  of  the 

16 


THE  EXCHANGE  AND  ITS  CONSTITUTION 

The  membership  of  a  member  expelled  or  becoming 
ineligible  for  reinstatement  may  be  disposed  of  by  the 
Committee  on  Admissions.1 

The  expulsion  or  suspension  of  a  member  does  not 
affect  the  rights  of  creditors  who  are  members  of  the 
Exchange  or  of  firms  registered  thereon.2 

When  a  member  is  in  debt  to  another  member,  the 
death  of  the  latter  or  the  transfer  of  his  membership 
does  not  affect  his  right,  or  that  of  his  firm  or  estate  to 
share  in  the  proceeds  of  the  membership  of  the  debtor 
member. 3 

Insolvency. 

A  member  who  fails  to  comply  with  his  contracts, 
or  is  insolvent,  or  who  is  a  partner  of  a  registered  firm  in 
such  a  position,  must  immediately  inform  the  President 
in  writing  and  prompt  notice  must  be  given  to  the  Ex- 
change. He  thereby  becomes  suspended  until,  after 
settlement  with  his  creditors,  he  is  reinstated.4 

When  the  President  ascertains  that  a  member  or  his 
firm  has  failed  to  meet  engagements  or  is  insolvent 

collateral  as  they  could  get  in  the  Michigan  courts,  and  contempo- 
raneously asserted  their  right  to  the  whole  or  part  of  the  proceeds  of 
the  sale  of  the  seat  before  the  Committee  on  Admissions.  It  was  held 
that  they  had  a  right  to  do  so  and  the  trustee's  application  was  denied. 
In  re  Currie  (C.  C.  A.  ),  185  Fed.  263. 

>Art.  XV,  Sec.  8. 

'Art.  XV,  Sec.  9. 

•Art.  XV,  Sec.  10. 

4Art.  XVI,  Sec.  i. 

A  rule  requiring  a  broker  to  report  his  default  in  complying  with  his 
stock  contracts  has  been  held  to  apply  only  to  contracts  for  the  purchase 
or  sale  of  stocks  on  the  board. 

Rorke  v.  San  Francisco  Stock  Exch.  Bd.  99  Cal.  196. 

17 


STOCK  EXCHANGE  LAWS 

and  has  neglected  to  comply  with  these  provisions  he 
announces  to  the  Exchange  the  insolvency  of  such  person 
or  firm.1 

On  the  failure  of  a  suspended  member  to  settle  with 
his  creditors  and  apply  for  reinstatement  within  one  year 
from  the  time  of  suspension,  his  membership  is  disposed 
of  by  the  Committee  on  Admissions.  The  time  of  set- 
tlement may  be  extended  by  the  Governing  Committee, 
by  a  two-thirds  vote  of  members  present,  for  periods  not 
exceeding  one  year  each.2 

When  a  suspended  member  applies  for  reinstatement 
he  must  furnish  a  list  of  his  creditors,  a  statement  of 
the  amounts  originally  owing,  and  the  nature  of  the 
settlement  made  in  each  case.  After  notice  of  the  pro- 
posed consideration  of  his  application  posted  for  three 
days,  and  his  presenting  satisfactory  proof  of  settlement, 
the  Committee  on  Admissions  ballots  for  him.  Failing 
an  approving  vote  of  two-thirds  of  the  entire  committee, 
the  applicant  is  entitled  to  be  balloted  for  at  any  five 
subsequent  meetings  within  one  year  of  suspension,  or 
such  extended  time  as  is  granted  by  the  Governing 
Committee.  If  rejected  on  the  sixth  ballot,  the  appli- 
cant may  appeal  to  the  Governing  Committee,  who  may 
reinstate  him  on  an  affirmative  vote  of  not  less  than 
twenty-five  members.  On  a  member's  failure  to  make 
such  applications,  or  if  rejected  by  the  Governing  Com- 
mittee, his  membership  may  be  disposed  of.3 

'Art.  XVI,  Sec.  2. 
'Art.  XVI,  Sec.  3. 
•Art.  XVI,  Sec.  4. 
Under  these  sections,  when  a  member  is  suspended,  the  rights  of  other 

18 


THE  EXCHANGE  AND  ITS  CONSTITUTION 

Whenever  the  Governing  Committee  determines  that 
a  member's  or  a  firm's  failure  is  due  to  reckless  or  un- 
businesslike dealing,  such  member  or  partner  or  part- 
ners may,  by  two-thirds  vote  of  existing  members  of  the 
Governing  Committee,  be  declared  ineligible  for  rein- 
statement. 1 

A  complete  list  of  creditors  and  amounts  due  must 
be  filed  with  the  Secretary  by  every  suspended  member 
within  thirty  days  after  suspension.2 

Expulsion  and  Suspension. 

The  penalty  of  expulsion  may  be  inflicted,  and  the 
period  of  suspension  determined,  by  a  vote  of  a  majority 
of  the  members  of  the  Governing  Committee;  and  the 
penalty  of  expulsion  or  of  ineligibility  of  a  suspended 

members  in  the  proceeds  of  his  seat  do  not  become  fixed  immediately, 
unless  the  seat  is  then  sold.  If  the  period  of  settlement  is  extended  for 
successive  yearly  periods  until  the  member's  death,  the  Committee  on 
Admissions  are  to  determine  the  rights  of  creditors  in  accordance  with 
the  provisions  of  the  constitution  relating  to  the  distribution  of  the 
proceeds  of  sale  after  the  death  of  a  member,  and  not  as  these  provisions 
stood  at  the  time  of  his  suspension. 

Haight  v.  Dickerman,  18  N.  Y.  Supp.  312. 

"Debts"  means  debts  contracted  among  members  as  such. 
Bernheim  v.  Keppler,  34  Misc.  321,  324. 

iArt.  XVI,  Sec.  5. 

'Art.  XVI,  Sec.  6. 

The  right  of  a  voluntary  association  to  provide,  in  its  constitution 
or  by-laws,  expulsion  as  a  penalty  for  an  infraction  or  disobedience  of 
its  laws  is  well  settled. 

Nat.  League  of  Com.  Merchts.  v.  Hornung,  148  App.  Div.  355. 

Expulsion  for  indictable  offenses  can  take  place  only  after  a  conviction 
by  a  jury,  but  where  the  offense  is  against  the  member's  duty  as  a  member 
he  may  be  expelled  on  trial  and  conviction  by  the  corporation. 
Leech  v.  Harris,  2  Brewst.  (Pa.)  571. 

The  court  will  not  examine  upon  the  merits  the  question  decided  by 
the  Governing  Committee  and  resulting  in  a  member's  expulsion.  It 
will  only  reverse  the  committee's  decision  when  there  is  a  total  absence 

19 


STOCK  EXCHANGE  LAWS 

member  for  readmission  may  be  inflicted  by  a  vote  of 
two- thirds  of  said  members.1  A  member  adjudged 
guilty  of  fraud  or  of  fraudulent  acts  shall  be  expelled.2 
Expulsion  is  the  penalty  for  making  a  misstatement  on  a 
material  point  upon  a  member's  application  either  for 
membership  or  reinstatement  or  extension  of  time.3 
Suspension  for  not  more  than  one  year  or  expulsion  is 
the  penalty  for  being  connected  with  any  organization 
in  the  city  of  New  York  permitting  dealings  in  securities, 
etc.,  dealt  in  on  the  Exchange.4  Suspension  for  not  more 
than  one  year  is  the  penalty  for  making  a  transaction 
with  a  non-member  in  the  rooms  of  the  Exchange  in 
such  securities,  etc.5  Suspension  or  expulsion  is  the 
penalty  for  wilful  violation  of  the  Constitution  or  of  a 
resolution  of  the  Governing  Committee  regarding  con- 
duct or  business,  or  conduct  inconsistent  with  just  and 
equitable  principles  of  trade.6  The  Governing  Com- 
mittee may  require  production  of  such  portion  of  a 
member's  books  or  papers  as  are  material  or  relevant 


of  evidence  warranting  it,  or  when  the  proceedings  before  the  com- 
mittee were  contrary  to  natural  justice. 

Young  v.  Eames,  78  App.  Div.  229,  affirmed  181  N.  Y.  542. 

Nat.  League  v.  Hornung,  148  App.  Div.  355. 

Baum  v.  N.  Y.  Cotton  Exch.,  4  N.  Y.  Supp.  207. 

Neukirch  v.  Keppler,  56  App.  Div.  225,  affirmed  174  N.  Y.  509. 

People  v.  N.  Y.  Produce  Exch.,  149  N.  Y.  401 

People  v.  Board  of  Trade,  80  111.  134. 

Board  of  Trade  v.  Riordan,  94  111.  App.  298. 
•Art.  XVII,  Sec.  i. 
'Art.  XVII,  Sec.  2 
•Art.  XVII,  Sec.  3. 
4Art.  XVII,  Sec.  4- 
'Art.  XVII,  Sec.  5. 
•Art.  XVII,  Sec.  6. 

20 


THE  EXCHANGE  AND  ITS  CONSTITUTION 

to  any  matter  under  investigation  by  said  Committee 
or  any  Standing  or  Special  Committee.  A  member 
refusing  or  neglecting  to  make  such  production  may  be 
adjudged  guilty  of  an  act  detrimental  to  the  interest 
or  welfare  of  the  Exchange.1  A  member  adjudged 
guilty  of  such  an  act  may  be  suspended  for  not  more 
than  one  year.2  An  accusation  charging  a  member 
with  the  commission  of  an  offense  or  a  violation  of  the 
laws  or  regulations  of  the  Exchange  shall  be  in  writing, 
specifying  the  charge  or  charges  with  reasonable  detail, 
and  signed  by  the  person  or  persons  making  the  charge 
or  charges.  A  copy  thereof  shall  be  served  upon  the 
accused  member,  who  shall  have  ten  days  or  such  further 
time  as  the  Governing  Committee  may  deem  proper 
within  which  to  answer.  The  answer  shall  be  in  writing 
signed  by  the  accused  member,  and  filed  with  the 
Secretary.  Upon  filing  or  refusal  to  answer,  the  Govern- 
ing Committee  shall,  at  a  regular  or  special  meeting, 

Pitcher  v.  Board  of  Trade,  121  111.  412. 
Nelson  v.  Board  of  Trade,  58  111.  App.  399. 
Ryan  v.  Lamson,  44  111.  App.  204. 

The  principle  whereby  a  court  of  equity  may  interfere  and  restore  a 
member  of  a  corporation  who  has  been  expelled  does  not  apply  to  a 
voluntary  unincorporated  body  like  the  Stock  Exchange.  The  privi- 
lege of  membership  in  the  latter  is  not  a  franchise.  It  is  derived 
exclusively  from  the  body  which  bestows  it,  and  may  be  conferred  or 
withheld  at  its  pleasure. 

White  v.  Brownell,  2  Daly,  329,  357. 

The  judgment  of  the  Governing  Committee,  made  after  regular  pro- 
ceedings, hearing  and  full  investigation,  as  to  certain  transactions 
alleged  to  have  been  fraudulently  conducted  by  the  member,  cannot  be 
reviewed  on  the  merits  by  the  courts. 

Neukirch  v.  Keppler,  56  App.  Div.  225. 

All  the  member  could  require  was  that  the  investigation  should  be 
»Art.  XVII,  Sec.  7. 
•Art.  XVH,  Sec.  8. 

21 


STOCK  EXCHANGE  LAWS 

proceed  to  consider  the  charge  or  charges ;  if  the  meeting 
be  a  special  meeting,  notice  of  its  object  shall  be  sent 
to  the  members  of  the  Committee  and  to  the  accused, 
who  shall  be  entitled  to  be  personally  present  and  to 
examine  and  cross-examine  the  witnesses  produced  and 
to  present  any  defense,  testimony  or  explanation.  If 
the  accused  member  is  adjudged  guilty  the  Committee 
shall  expel  or  suspend  such  member,  as  the  case  may  be; 
the  President  shall  announce  the  result  to  the  Exchange, 
and  a  written  notice  shall  be  served  upon  the  member. 
The  finding  of  the  Committee  shall  be  final  and  con- 
clusive.1 The  Committee  may  proceed  summarily  in 
the  case  of  misconduct,  or  the  commission  of  an  offense 
for  which  the  penalty  is  limited  to  suspension  for  a 
period  not  exceeding  sixty  days.  If  adjudged  guilty, 
the  accused  may  be  suspended  for  such  period  as  the 
Constitution  provides.2  Announcement  of  suspension 
shall  be  made  to  the  Exchange,  and  the  member  de- 
prived of  all  rights  and  privileges  of  membership,  except 
those  pertaining  to  the  Gratuity  Fund.3  Professional 

conducted  bona  fide  upon  notice  to  him  and  an  opportunity  to  be  heard, 
and  that  the  decision  made  should  be  within  the  scope  of  the  juris- 
diction conferred  on  the  committee, 
id.  citing 

Bigelow  v.  Benedict,  70  N.  Y.  204. 
Lewis  v.  Wilson,  121  N.  Y.  288. 
White  v.  Brownell,  2  Daly,  329. 
Lambert  v.  Addison,  46  L.  T.  Rep.  20. 

Where  a  member  is  expelled  in  conformity  with  the  rules,  and  the 
proceedings  are  regular  and  in  good  faith,  it  is  final,  and  no  judicial 
tribunal  can  interfere. 

White  v.  Brownell,  2  Daly,  329,  359. 
'Art.  XVII,  Sec.  9. 
'Art.  XVII,  Sec.  10. 
'Art.  XVII,  Sec.  11. 

22 


THE  EXCHANGE  AND  ITS  CONSTITUTION 

counsel  are  excluded  from  any  investigation  or  hearing 
before  the  Governing  Committee  or  any  Standing  or 
Special  Committee.1 

Rules  for  the  Conduct  of  Business. 

A  large  number  of  rules  regulate  the  conduct  of  busi- 
ness upon  the  Exchange.  All  contracts  are  subject  to 
these  rules.2 

Hours  are  prescribed  within  which  the  Exchange  must 
remain  open,  except  by  order  of  the  Governing  Com- 
mittee,3 and  a  fine  is  imposed  for  dealing  in  other  than 
the  official  hours.4  Dealing  upon  any  other  Exchange 

But  a  court  of  equity  may  interfere  for  the  purpose  of  holding  the 
association  to  a  fair  and  honest  administration  of  its  rules. 

Hutchinson  v.  Lawrence,  67  How.  Pr.  38. 

The  courts  will  not  interfere  with  the  rules  on  the  motion  of  a  non- 
member. 

Heim  v.  N.  Y.  Stock  Exch.,  64  Misc.  529,  aff'd  138  App.  Div.  96. 
An  expulsion,  if  regularly  made,  is  conclusive,  and  cannot  be  inquired 
into  collaterally,  by  mandamus  or  otherwise.     The  court  can  give  no 
relief,  except  in  case  of  irregularity  of  the  proceedings. 

Leech  v.  Harris,  2  Brewst.  (Pa.)  571. 

But  a  broker  cannot  be  irregularly  expelled,  and  injunction  will  lie 
to  restrain  an  illegal  expulsion,  even  before  the  report  of  the  committee. 
Leech  v.  Harris,  2  Brewst.  (Pa.)  571. 
Moffatt  v.  Board  of  Trade  (Mo.),  in  S.  W.  894. 
Right  to  expel  for  "bad  faith  and  dishonorable  conduct"  does  not 
give  a  board  the  right  to  expel  members  at  its  pleasure,  without  reference 
to  the  deeds  it  considers  bad  faith  and  dishonorable  conduct. 

Nelson  v.  Board  of  Trade,  58  111.  399. 

Mandamus  will  not  lie  for  the  reinstatement  of  an  expelled  member, 
nor  suit  for  an  injunction. 

Matter  of  Weidenlekt  v.  Keppler,  84  App.  Dp-.  235. 
Baum  v.  N.  Y.  Cotton  Exch.,  4  N.  Y.  Supp.  207. 
People  v.  Board  of  Trade,  80  111.  i  ^4. 
'Art.  XVII,  Sec.  12. 
'Art.  XXII. 

'Art.  XX,  Sees,  i  and  2. 
4Art.  XX,  Sec.  3. 


STOCK  EXCHANGE  LAWS 

in  the  city  of  New  York  or  publicly  outside  the  Stock 
Exchange  in  securities  listed  or  quoted  on  the  Exchange 
is  prohibited. l 

The  manner  of  making  and  accepting  bids  and  offers 
for  stock  is  regulated,  and  these  rules  must  be  observed 
under  penalty  of  fine  and  suspension.2  Briefly  stated,  all 

Bostedo  v.  Board  of  Trade,  227  111.  90. 
Baster  v.  Board  of  Trade,  83  111.  146. 
Pitcher  v.  Board  of  Trade,  121  111.  412. 
Board  of  Trade  v.  Weare,  105  111.  289. 

A  member  in  resisting  the  unlawful  authority  of  the  Exchange,  com- 
mits no  offense  against  his  duty  as  a  member. 

Leech  v.  Harris,  2  Brewst.  (Pa.)  571. 

Action  was  brought  against  the  board  of  managers  of  an  Exchange  for 
damages  for  unlawful  suspension,  after  the  member  had  been  rein- 
stated by  the  courts.  It  was  held  that  in  the  absence  of  malice,  the 
board,  acting  in  a  quasi  judicial  capacity,  was  not  liable  for  errors  of 
judgment  determining  matters  within  its  jurisdiction. 

Lurman  v.  Jarvie,  82  App.  Div.  37. 

A  member  of  a  Board  of  Trade  was  under  charges  for  alleged  viola- 
tion of  its  rules  and  by-laws.  He  urged  that  he  had  sold  his  membership 
prior  to  the  preferring  of  the  charges.  It  was  held  that  as  the  transfer 
of  the  seat  had  not  been  consented  to  by  the  board  he  had  not  ceased 
to  be  a  member,  and  the  board  did  not  lose  jurisdiction  to  try  him  on 
the  charges. 

Bostedo  v.  Board  of  Trade,  227  111.  90. 

In  trials  of  a  member  by  a  committee  the  laws  of  the  association  limit 
the  jurisdiction  of  the  tribunal. 

Bartlett  v.  Bartlett  &  Son  Co.,  116  Wis.  450. 

Voluntary  submission  by  a  member  to  a  trial  before  a  committee 
estops  him  from  denying  its  jurisdiction. 

Ryan  v.  Cudahy,  157  111.  108. 

A  by-law  should  state  the  causes  of  suspension  and  expulsion  with 
such  reasonable  degree  of  certainty  that  a  member  may  know  the  trans- 
gressions which  will  subject  him  to  the  penalty. 

People  v.  N.  Y.  Produce  Exch.,  149  N.  Y.  401. 
An  accused  member  is  entitled  to  proper  notice  of  proceedings  for 
his  expulsion,  so  that  he  may  be  heard. 

People  v.  East  Buffalo  Live  Stock  Assn.,  88  App.  Div.  619. 
State  v.  Milwaukee  Chamber  of  Commerce,  47  Wis.  670. 
A  strict  compliance  with  the  Constitution  and  by-laws  in  this  respect 
is  essential. 

»Art.  XX,  Sec.  4. 
•Art.  XXIII. 

24 


THE  EXCHANGE  AND  ITS  CONSTITUTION 

bids  and  offers  must  be  made  either  (a)  "Cash,"  i.  e., 
for  delivery  upon  the  day  of  contract;  (b)  "Regular 
Way,"  i.  e.,  for  delivery  upon  the  business  day  following 
the  contract;  (c)  "At  three  days,"  i.  e.,  for  delivery 
upon  the  third  day  following  the  contract;  (d)  "Buyer's" 
or  "Seller's"  options  for  not  less  than  four  days  nor  more 
than  sixty  days.1  These  bids  or  offers  must  not  be 


Quentell  v.  N.  Y.  Cotton  Exchange,  56  Misc.  150. 
"The  principle  to  be  deduced  from  all  the  cases  is  that  in  every  pro- 
ceeding before  a  club,  society  or  association,  having  for  its  object  the 
expulsion  of  a  member,  the  member  is  entitled  to  be  fully  and  fairly 
informed  of  the  charge  and  to  be  fully  and  fairly  heard." 

Hutchinson  v.  Lawrence,  67  How.  Pr.  38,  55. 

Charges  against  members  are  not  to  be  tested  by  the  strict  rules 
of  criminal  pleading.  It  is  sufficient  if  the  member  is  notified  of  what 
the  alleged  violation  consists. 

Board  of  Trade  v.  Nelson,  162  111.  431. 

The  decision  of  a  committee  may  be  avoided  on  account  of  its  re- 
fusal to  hear  competent  evidence. 

Ryan  v.  Cudahy,  157  111.  108. 

A  member  of  an  Exchange  like  the  New  York  Cotton  Exchange, 
against  whom  proceedings  are  instituted  under  its  by-laws,  must  first 
exhaust  his  remedies  within  the  association  before  he  may  invoke  redress 
from  the  courts. 

Moyse  v.  New  York  Cotton  Exchange,  143  App.  Div.  265.  (Proceed- 
ings for  expulsion  for  violation  of  by-laws ) 
Hurst  v.  N.  Y.  Produce  Exchange,  100  N.  Y.  605. 
Lewis  v.  Wilson,  50  Hun.  166. 

The  rule  that  a  member  must  first  exhaust  his  remedy  within  the 
association  applies  only  when  the  proceedings  are  conducted  in  ac- 
cordance with  the  constitution  and  by-laws. 

Quentell  v.  N.  Y.  Cotton  Exch.,  56  Misc.  150. 
A  member  is  not  bound  by  a  judgment  of  the  board  if  not  conducted 
in  accordance  with  the  by-laws. 

Board  of  Trade  v.  Riordan,  94  111.  App.  298. 

The  law  does  not  require  resort  to  higher  authority  within  the  or- 
ganization when  it  appears  that  such  action  would  be  futile. 

Quentell  v.  N.  Y.  Cotton  Exchange,  56  Misc.  150,  where  the  high- 
est power,  the  board  of  managers,  had  approved  in  advance  of 
the  illegal  methods  pursued  by  the  supervisory  committee  in 
proceeding  against  the  plaintiff. 
'Art,  XXIII,  Sec.  3. 


made  at  a  less  variation  than  one-eighth  of  one  per 
cent. l 

Fictitious  transactions  are  forbidden  under  penalty 
of  suspension  for  not  more  than  one  year.2 

A  customer  is  entitled  to  the  return  of  the  money  de- 
posited by  him  where  there  has  been  no  genuine  trans- 
action.3 

By  a  resolution  of  February  5,  1913,  no  member  or 
his  firm  shall  give  or  knowingly  execute  orders  for  the 
purchase  or  sale  of  securities  which  would  involve  no 
change  of  ownership,  under  the  same  penalty.  Deal- 
ing in  privileges  to  receive  or  deliver  securities  is  punish- 
able by  a  fine.4 

By  resolution  of  December  14,  1898,  members  having 
orders  to  buy  and  sell  the  same  security  must  offer  it 
at  one-eighth  per  cent,  higher  than  their  bid  before  mak- 
ing transactions  with  themselves. 

"Specialists"  are  forbidden  to  deal  in  the  stocks  en- 
trusted to  them,  to  buy  or  sell  directly  or  indirectly 
for  their  own  account,  for  account  of  a  partner,  or  for 


iArt.  XXIII,  Sec.  5. 
'Art.  XXIII,  Sec.  8. 

See  Laws  1913,  ch.  476.     Penal  Law  sec.  95 1 ,  infra  p.  207. 
Laws  1913,  ch.  253.     Penal  Law  sec.  953,  infra  p.   208. 
Laws  1913,  ch.  595.     Penal  Law  sec.  957,  as  to  delivery  of  memo- 
randa of  transactions  to  customer,  infra  p.  212. 
Where  a  transaction  may  from  one  point  of  view  be  regarded  as  a 
fictitious  sale,  and  from  another  as  fraudulent  sale  of  stock,  the  Gov- 
erning Committee  may  treat  it  as  a  fraudulent  one. 

Young  v.  Eames,  78  App.  Div.  229. 
'Fuller  v.  Mun.  Tel.  &  St.  Co.  117  App.  Div.  352. 

Haight  v.  Haight  &  Freese  Co.,  46  Misc.  501;  102  App.  Div.  475; 

aff'd  190  N.  Y.  540. 
'Art.  XXIII,  Sec.  9. 

26 


THE  EXCHANGE  AND  ITS  CONSTITUTION 

any  account  in  which  they  have  an  interest.1  The  rule 
does  not  apply  where  the  member,  having  neglected  to 
execute  an  order,  is  compelled  to  take  or  supply  the 
securities  on  his  own  account.  In  such  a  case  he  is  not 
acting  as  a  broker  and  can  charge  no  commission. 

Members  are  forbidden  to  deal  in  any  listed  security, 
anywhere  outside  of  the  Exchange,  except  at  a  legitimate 
auction.  This  rule  has  been  emphasized  by  a  resolution 
declaring  that  this  practice  in  any  form  is  detrimental 
to  the  interest  and  welfare  of  the  Exchange.2 

Transactions  with  or  for  "  bucket-shops"  are  forbidden,3 
as  well  as  speculative  transactions  for  clerks  of  members 
or  of  banks,  trust  companies,  bankers  or  insurance  com- 
panies, without  the  written  consent  of  their  employers.4 

Members  are  required  to  use  diligence  to  learn  the 
essential  facts  relating  to  all  accounts  accepted  by  them, 
and  to  the  possible  use  of  a  name  for  the  account  other 
than  that  of  the  party  interested.5 

AH  ™itv>  or  other  connection  with  the  Consolidated 

NOTE 

The  prohibition  of  all  wire  or  other  connection  with  the 
Consolidated  Stock  Exchange,  etc,  as  stated  on  pages  27 
and  28,  was  rescinded  by  a  resolution  of  the  Governing 
Committee  of  the  New  York  Stock  Exchange  on  June  aZ 
1913-  J  * 


4Resolution  of  March  30,  1910. 

See  Laws  1913,  ch.  592.    Penal  Law  sec.  954  infra  p.  209. 
'id. 

27 


STOCK  EXCHANGE  LAWS 

made  at  a  less  variation  than  one-eighth  of  one  per 
cent. l 

Fictitious  transactions  are  forbidden  under  penalty 
of  suspension  for  not  more  than  one  year.2 

A  customer  is  entitled  to  the  return  of  the  money  de- 
posited by  him  where  there  has  been  no  genuine  trans- 
action.3 

By  a  resolution  of  February  5,  1913,  no  member  or 
his  firm  shall  give  or  knowingly  execute  orders  for  the 
purchase  or  sale  of  securities  which  would  involve  no 
change  of  ownership,  under  the  same  penalty.  Deal- 
ing in  privileges  to  receive  or  deliver  securities  is  punish- 
able by  a  fine.4 

By  resolution  of  December  14,  1898,  members  having 
orders  to  buy  and  sell  the  same  security  must  offer  it 
at  one-eighth  per  cent,  higher  than  their  bid  before  mak- 
ing transactions  with  themselves. 

"Specialists"  are  forbidden  to  deal  in  the  stocks  en- 
trusted to  them,  to  buy  or  sell  directly  or  indirectly 
for  their  own  a<-/^"~<-  r-- 


,  .,-  ~~~  OWJL,  102  npp.  Div.  475; 
a.ju  u  190  JN.  Y.  540. 
'Art.  XXIII,  Sec.  9. 

26 


THE  EXCHANGE  AND  ITS  CONSTITUTION 

any  account  in  which  they  have  an  interest.1  The  rule 
does  not  apply  where  the  member,  having  neglected  to 
execute  an  order,  is  compelled  to  take  or  supply  the 
securities  on  his  own  account.  In  such  a  case  he  is  not 
acting  as  a  broker  and  can  charge  no  commission. 

Members  are  forbidden  to  deal  in  any  listed  security, 
anywhere  outside  of  the  Exchange,  except  at  a  legitimate 
auction.  This  rule  has  been  emphasized  by  a  resolution 
declaring  that  this  practice  in  any  form  is  detrimental 
to  the  interest  and  welfare  of  the  Exchange.2 

Transactions  with  or  for ' '  bucket-shops"  are  forbidden,3 
as  well  as  speculative  transactions  for  clerks  of  members 
or  of  banks,  trust  companies,  bankers  or  insurance  com- 
panies, without  the  written  consent  of  their  employers.4 

Members  are  required  to  use  diligence  to  learn  the 
essential  facts  relating  to  all  accounts  accepted  by  them, 
and  to  the  possible  use  of  a  name  for  the  account  other 
than  that  of  the  party  interested.5 

All  wire  or  other  connection  with  the  Consolidated 
Stock  Exchange  or  the  offices  of  its  members  is  pro- 

»Resolution  of  March  30,  1910. 

See  Laws  1913,  ch.  592.     Penal  Law  sec.  954,  infra  p.  209. 
'Resolution  of  June  9,  1886. 

See  Laws  1913,  ch.  477.     Penal  Law  sec.  444  infra  p.  203. 
Bucket-Shops.     The  fact  that  a  member  conducting  a  bucket-shop 
handles  only  corporate  stocks  not  dealt  in  on  the  Exchange  does  not 
affect  its  power  to  discipline  him. 

Bostedo  v.  Board  of  Trade,  130  111.  App.  560. 
'Resolution  of  May  19,  1909. 

See  Laws  1909,  ch.  88.     Consol.  Laws  1909,  chap.  40,  Penal  Law, 

sec.  390,  394,  infra  pp.  199,  202. 
'Resolution  of  March  30,  1910. 

See  Laws  1913,  ch.  592.     Penal  Law  sec.  954  infra  p.  209. 
•id. 

27 


r  STOCK  EXCHANGE  LAWS 

hibited,  as  well  as  the  transaction  of  business,  directly 
or  indirectly,  with  the  members  of  that  Exchange.1 

No  telephonic  or  telegraphic  connection  may  be  made 
between  the  office  of  a  member  or  his  firm  and  the  office 
of  any  firm  or  individual  not  a  member  without  the 
approval  of  the  Committee  of  Arrangements.  Where 
such  connection  is  allowed,  the  member  making  it 
is  not  permitted  to  pay  the  expense  of  telegraph  oper- 
tors  or  any  other  expense  connected  with  it  except  that 
of  the  wire  connection.  Only  the  wires  of  companies 
approved  by  the  Committee  of  Arrangements  may  be 
used.2 

Telephonic  communication  between  the  offices  of 
members  and  the  Exchange  is  no  longer  a  matter  of 
right,  but  is  in  the  discretion  of  the  Committee  of  Ar- 
rangements. A  member  aggrieved  by  its  decision  may 
appeal  to  the  Governing  Committee.  If  the  privilege 
is  withdrawn  from  a  member  no  other  member  may, 
after  the  decision  is  posted,  furnish  the  member  or  his 

'Resolution  of  May  19,  1909. 

Since  the  adoption  of  this  Resolution  chapter  477,  Laws  of  1913  was 
enacted.  This  Law  makes  discrimination  against  other  Exchanges 
and  brokers  a  misdemeanor.  See  summary  of  laws,  infra  p.  52. 

See  Heim  v  N.  Y.  Stock  Ex.,  64  Misc.  529,  aff'd  138  App.  Div.  96. 

'Resolution  of  May  9,  1900. 

Outsiders  have  no  status,  it  appears,  to  restrain  an  Exchange  from 
prohibiting  all  its  members  from  doing  business  on  the  floor  for  the 
outsiders.    The  Exchange's  action  appearing  to  be  regular,  the  outsiders 
cannot  undertake  to  regulate  its  manner  of  conducting  business. 
Russell  v.  N.  Y.  Produce  Exch.  27  Misc.  381. 

The  resolution  of  May  19,  1909,  prohibiting  business  with  members  of 
the  Consolidated  Exchange,  not  being  adopted  through  any  bad  motives 
but  to  protect  its  own  interests,is  not  an  "illegal  combination  in  restraint 
of  trade"  in  violation  of  Laws  1890,  p.  1514,  c.  690. 

Heim  v.  N.  Y.  Stock  Exch.  64  Misc.  529,  aff'd  138  App.  Div.  96. 

28 


THE  EXCHANGE  AND  ITS  CONSTITUTION 

firm  with  any  such  telephonic  facilities  under  penalty 
of  suspension  for  two  months. l 

A  member  must  report  his  transactions  as  promptly 
as  possible  at  his  office,  where  opportunity  must  be 
offered  for  prompt  comparison.2  The  seller  must 
compare,  or  endeavor  to  compare,  each  transaction  at 
the  office  of  the  buyer,  not  later  than  one  hour  after  the 
closing  of  the  Exchange.3  The  buyer  must  investigate, 
before  10  A.  M.  of  the  day  after  the  purchase,  each 

Resolution  of  Nov.  8,  1911. 

In  Illinois  the  sending  out  of  quotations  to  encourage  speculation  in 
futures  is  held  by  its  Supreme  Court  to  be  in  violation  of  the  State 
statutes.  The  Federal  Court,  eighth  circuit  (Missouri),  therefore 
holds  that  the  Chicago  Board  of  Trade  cannot  assert  its  claimed  prop- 
erty right  in  such  quotations  in  a  court  of  equity. 

Christie  Grain  &  Stock  Co.  v.  Board  of  Trade  (C.  C.  A.),  125   Fed. 

161,  reversing  116  Fed.  944. 

But  the  seventh  circuit  seems  to  hold  an  entirely  different  opinion. 
Even  supposing,  it  holds,  that  a  large  proportion  of  the  contracts  made 
on  the  Exchange  were  gambling  transactions,  that  did  not  deprive  the 
Board  of  Trade  of  its  property  right  in  the  price  quotations.  These 
quotations  were  the  same  for  the  lawful  as  for  the  unlawful  transactions, 
and  the  right  of  property  therein  was  not  affected  by  the  fact  that  they 
might  be  used  for  unlawful  purposes.  The  court  felt  unable  to  concur 
in  the  Christie  Grain  &  Stock  Co.  case  and  other  cases  cited. 

Board  of  Trade  of  City  of  Chicago  v.  L.  A.  Kinsey  Co.  (C.  C.  A.), 

130  Fed.  507. 
The  U.  S.  Supreme  Court  took  the  view  of  the  seventh  circuit. 

Board  of  Trade  v.  L.  A.  Kinsey,  198  U.  S.  236. 
The  N.  Y.  Stock  Exchange  may,  as  a  condition  of  furnishing  a  tele- 
graph company  with  its  quotations,  require  transmission  to  approved 
persons  only;  a  rejected  applicant  is  not  entitled  to  mandamus  to  compel 
the  telegraph  company  to  instal  a  ticker  in  his  office  and  furnish  him 
with  quotations. 

Matter  of  Renville,  46  App.  Div.  37. 

The  right  is  not  surrendered  by  allowing  its  subscribers  to  post  the 
quotations  upon  blackboards  in  their  places  of  business  for  the  ad- 
vantage of  the  subscribers  and  not  of  the  public. 

McDearmott  Commission  Co.  v.  Board  of  Trade  (C.  C.  A.),  146 

Fed.  961. 

'Art.  XXIV,  Sec.  i. 
'Art.  XXIV,  Sec.  2. 

29 


STOCK  EXCHANGE  LAWS 

transaction  not  compared  by  the  seller. l  Neglect  of 
either  to  do  so  is  punishable  by  fine.2 

Various  rules  regulate  the  mode  of  making  compar- 
isons.3 Comparisons  are  made  by  an  exchange  of  an 
original  and  a  duplicate  comparison  ticket.  An  exchange 
of  Clearing-House  tickets  constitutes  a  comparison.4 
When  written  contracts  have  been  exchanged  the  signers 
thereof  only  are  liable.5 

The  party  delivering  securities  may  require  payment 
upon  delivery;  if  delivery  is  made  upon  transfer,  at 
the  time  and  place  of  transfer.6  The  receiver  has  the 
option  of  requiring  delivery  either  in  certificates  or  by 
transfer,  except  where  personal  liability  attaches  to 
ownership,  where  the  seller  has  the  right  to  make  delivery 
by  transfer.7  Payment  must  be  made  not  later  than 
2:15  P.  M.  for  all  stock  tendered  in  lots  of  one  hundred 
shares  or  multiples  thereof;  the  buyer  may  buy  in  the 
undelivered  portion  "under  the  rule"  as  hereinafter 
described.8 

All  deliveries  must  be  made  before  2:15  P.  M.,  failing 
which  the  contract  may  be  closed  "under  the  rule."  (See 
page  31.)  The  party  in  default  is  liable  for  any  damage 
caused  thereby,  provided  claim  for  such  damage  is 


'Art.  XXIV,  Sec.  3. 
•Art.  XXIV,  Sec.  4. 
*Art.  XXIV,  Sees.  5-9. 
4Art.  XXIV,  Sec.  5. 
•Art.  XXIV,  Sec.  10. 
•Art  XXV,  Sec.  i. 
7Art.  XXV,  Sec.  2. 
8Art.  XXV,  Sec.  4. 


THE  EXCHANGE  AND  ITS  CONSTITUTION 

made  before  3  P.  M.  on  the  business  day  following  the 
default. *  The  neglect  or  failure  of  a  member  or  firm  to 
exchange  Clearing-House  tickets  constitutes  a  default, 
and  the  contract  may  then  be  closed  "under  the  rule," 
except  that  the  time  limit  for  delivery  of  notice  of  in- 
tention to  close  is  10:30  A.  M.  of  the  following  business 
day  and  the  time  for  closing  is  not  before  10  A.  M.2  Rules 
regulate  delivery  on  half-holidays.3 

The  Stock  Exchange  Clearing-House  acts  as  the  com- 
mon agent  of  the  members  in  receiving  and  delivering  the 
securities  designated  by  the  Clearing-House  Com- 
mittee.4 

To  constitute  a  good  delivery  all  deliveries  on  sales 
of  stock  must  be  accompanied  by  a  stamped  sales 
ticket.5 

An  important  regulation  is  that  governing  the  closing 
of  contracts  "under  the  rule."  When  the  insolvency 
of  a  member  or  firm  is  announced,  members  having  con- 
tracts subject  to  the  rules  of  the  Exchange  with  such 
member  or  firm  must  proceed  to  close  them  without 
unnecessary  delay.  If  the  securities  involved  are  quoted 
on  the  Exchange  the  closing  must  be  on  the  Exchange, 
either  officially  by  the  Chairman,  or  by  personal  pur- 
chase or  sale.  If  they  are  not  dealt  in  on  the  Exchange 


'Art.  XXVI,  Sec.  i. 
'Art.  XXVI,  Sec.  2. 
'Art.  XXVI,  Sees.  4,  5. 
4Art.  XXVII. 

"Resolution  of  November  9,  1910. 

See  also  Laws  1909,  Chap.  61,  Penal  Law,  sec.    270,    as    amended, 
providing  for  stamp  taxes,  infra  p.  236. 

31 


STOCK  EXCHANGE  LAWS 

they  must  be  purchased  or  sold  in  the  best  available 
market.  If  the  contract  is  not  so  closed,  the  price  of 
settlement  is  the  price  current  when  it  should  have 
been  closed.1 

A  contract  not  fulfilled  according  to  its  terms  may  be 
officially  closed  "under  the  rule"  by  the  Chairman.2 
Written  notice  of  intention  must  be  given  the  defaulting 
party  before  2 130  P.M.,  and  the  contract  cannot  be  closed 
before  2:35  p.  M.3  When  a  loan  of  money  is  not  paid 
before  2 115  p.  M.  of  the  day  it  becomes  due,  the  borrower 
is  considered  as  in  default,  and  the  lender  may  sell  "under 
the  rule"  so  much  of  the  pledged  securities  as  may  be 
necessary  to  liquidate  the  loan.4 

Mutual  cash  deposits  not  exceeding  ten  per  cent,  may 
be  required  by  either  party  to  a  contract  at  any  time,5 
and  the  holder  of  a  due-bill  issued  for  the  dividend  on 
stock  contracted  for  may  require  the  maker  of  the  due- 
bill  to  deposit  the  full  amount  in  a  trust  company, 
payable  to  the  joint  order  of  the  parties.6  Failure  to 


i Art.  XXVIII,  Sec.  i. 

A  brokerage  firm  sold  stock  for  an  undisclosed  principal  and  soon 
after  notified  the  Exchange  of  its  insolvency.  The  buying  broker  dosed 
his  contracts  under  the  rule,  settling  by  the  payment  to  the  receiver  of 
differences  on  this  and  other  contracts.  The  owner  of  the  stock  de- 
manded that  they  take  and  pay  for  it.  It  was  held  that  the  owner 
could  not  recover  the  purchase  price  in  an  action  against  the  purchasing 
broker,  the  announcement  of  the  failure  being  a  request  to  the  defendant 
to  close  his  contract.  (Kent  v.  De  Coppet,  149  App.  Div.  589.) 

2Art.  XXVIII,  Sec.  2. 

•Art.  XXVIII,  Sees.  2,  3. 

4Art.  XXVIII,  Sec.  10. 

'Art.  XXXI,  Sec.  i. 

•Art.  XXXI,  Sec.  2. 

32 


THE  EXCHANGE  AND  ITS  CONSTITUTION 

comply  with  a  demand  for  a  deposit  constitutes  a  default, 
and  the  other  party  may  have  the  contract  reestablished 
"under  the  rule."1 

The  time  when  a  security  becomes  "ex-dividend"  and 
"ex-rights"  is  regulated.2 

A  charge  of  one  per  cent,  may  be  made  for  collecting 
dividends;  but  no  charge  may  be  made  for  collecting 
dividends  accruing  on  securities  deliverable  on  a  con- 
tract.3 Offers  to  buy  or  sell  dividends  may  not  be 
made  publicly  on  the  Exchange  under  penalty  of  a 
fine.4 

Corporations  whose  shares  are  listed  must  maintain  a 
transfer  agency  and  a  registry  office  in  the  Borough  of 
Manhattan  acceptable  to  the  Committee  on  Stock  List.5 
Thirty  days  notice  must  be  given  of  a  proposed  increase 
of  capital  stock  before  it  can  be  listed.6  Shares  may  be 
registered  on  the  conversion  of  convertible  bonds,  and 
listed  on  notice  to  the  Exchange.7  The  Governing  Com- 
mittee may  suspend  dealings  in  any  securities  quoted 
on  the  Exchange,  or  summarily  remove  any  securities 
from  the  list.8  After  admission  of  a  security  no  change 


iArt.  XXXI,  Sec.  4. 

'Art.  XXXII,  Sees,  i,  2. 

'Art.  XXXII,  Sec.  3. 

4Art.  XXXII,  Sec.  4. 

'Art.  XXXIII,  Sec.  i. 

Under  this  article,  the  transfer  and  registry  offices  must  be  main- 
tained separately.  This  is  insisted  upon  by  the  Exchange  in  order  that 
every  precaution  may  be  taken  against  fraud. 

"Art.  XXXIII,  Sec.  2. 

'Art.  XXXIII,  Sec.  3. 

•Art.  XXXIII,  Sec.  4. 

33 


STOCK  EXCHANGE  LAWS 

in  the  form  of  certificate,  or  of  the  transfer  agency  or 
the  registrar  of  shares  or  of  the  trustee  of  bonds  may  be 
made  without  the  approval  of  the  Committee  on  Stock 
List.1 

When  the  Committee  on  Stock  List  is  of  opinion 
that  the  outstanding  amount  of  any  listed  security 
has  become  so  reduced  as  to  make  further  dealings 
inadvisable  it  may  direct  it  to  be  taken  from  the 
list.2 

Commissions  must  be  charged  on  all  purchases  and 
sales  of  securities.  These  must  be  absolutely  net,  with- 
out any  rebatement,  direct  or  indirect;  and  no  bonus  or 
share  of  commission  may  be  given  directly  or  indirectly 
for  business  procured  for  a  member.3  The  employment 
of  clerks  in  nominal  positions  because  of  the  business 
obtained  by  them  for  their  employers  is  a  violation  of 
this  rule.4  The  custom  of  "bunching"  orders  and  not 
charging  any  commission  to  an  associate  in  the  sale  is  pro- 
hibited.5 The  rates  of  commission  which  may  be  charged 
members  and  non-members  are  fixed  by  the  rules.6 
Transacting  business  in  commodities  without  commis- 
sion, or  for  a  nominal  commission,  for  a  customer  dealing 
in  securities  is  a  method  for  rebatement  of  commissions 


'Art.  XXXIII,  Sec.  5. 

'Resolution  of  March  27,  1895. 

'Art.  XXXIV,  Sec.  i. 

'Resolution  of  January  23,  1901. 

'Resolution  of  June  12,  1912. 

•Resolutions  of  November  23,  1881;  October  24,  1894;  April  13,  1910; 
April  12,  1911;  June  12,  1907;  December  28,  lojti,  and  January  24, 
1912. 

34 


THE  EXCHANGE  AND  ITS  CONSTITUTION 

and  a  violation  of  the  commission  rule.  And  giving 
reciprocal  business  in  commodities  dependent  on  the 
amount  of  Stock  Exchange  business  received  is  also  a 
violation. *  A  proposition  for  the  transaction  of  business 
at  less  than  the  minimum  rates  of  commission  provided 
by  the  rules  is  a  violation  of  the  commission  rule.2  A 
suspended  member  is  not  entitled  to  have  his  business 
transacted  at  members'  rates  of  commission,  except  in 
the  case  of  a  member  suspended  by  reason  of  insolvency.3 
The  penalty  for  violation  of  the  commission  rule  is, 
for  the  first  offense,  suspension  for  from  one  to  five  years; 
for  the  second  offense,  the  penalty  is  expulsion.4  Arbi- 
trage trading  with  cities  in  the  United  States  based 
upon  quotations  from  the  Exchange,  and  arbitrage  busi- 
ness by  joint  account,  or  account  designed  to  produce 
the  same  result,  having  been  found  to  nullify  the  com- 
mission rule,  is  forbidden.5 

An  arrangement  with  a  customer  for  special  or  unusual 
rates  of  interest,  or  money-advances  upon  unusual  terms 
to  give  the  customer  special  advantages  is  a  violation  of 
the  commission  rule.5 

The  Governing  Committee  is  of  opinion  that  a  member 
who  relieves  a  customer  from  any  part  of  the  Stamp 
Tax  violates  the  commission  rule.7 

'Resolution  of  April  14,  1897. 

'Art.  XXXIV,  Sec.  4. 

'Art.  XXXIV,  Sec.  5. 

'Art.  XXXIV,  Sec.  6. 

'Resolution  of  January  26,  1898;  resolution  of  April  20,  1911. 

'Resolution  of  March  26,  1902. 

'Resolution  of  May  24,  1005. 

See  Tax  Law  sees.  270-277  infra  p.  236. 

j.T 


STOCK  EXCHANGE  LAWS 

The  addresses  of  members  and  their  partnerships  and 
dissolutions  must  be  registered  with  the  Secretary. l  No 
member  can  be  a  general  or  special  partner  in  more  than 
one  registered  firm  at  one  time,2  except  in  the  case  of 
foreign  partnerships.3  Members  may  not  form  part- 
nerships with  suspended  or  expelled  members,  nor  with 
an  insolvent  person,  nor  with  a  former  member  against 
whom  a  member  holds  an  unsettled  claim.  A  member 
who  is  a  special  partner  does  not  confer  any  of  the 
privileges  of  the  Exchange  on  his  firm.4  A  general 
partner  is  liable  for  the  acts  and  omissions  of  his  firm; 
but  he  may  be  relieved  from  liability  in  the  discretion 
of  the  Governing  Committee.5  Branch  offices  may  be 
established  by  members,  the  managing  clerk  and  other 
employees  of  which  must  be  paid  by  fixed  salaries,  not 
varying  with  the  business;  and  no  agents  for  the  solicita- 
tion of  business  shall  be  employed  on  any  other  basis.6 
If  the  Governing  Committee  disapproves  of  any  part- 
nership, branch  office  or  interest  in  a  foreign  partner- 
ship, it  may  require  the  dissolution  of  the  partnership, 
or  the  discontinuance  of  the  branch  office  or  the  interest 
in  the  foreign  partnership.7  The  penalty  for  violation 
of  the  rules  as  to  partnership  is  suspension  for  one  year.8 


'Art.  XXXV,  Sec.  i. 
'Art.  XXXV,  Sec.  2. 
'Art.  XXXV,  Sec.  3. 
4Art.  XXXV,  Sec.  4. 
'Art.  XXXV.  Sec.  5. 
•Art.  XXXV,  Sec.  6. 
'Art.  XXXV,  Sec.  7. 
•Art.  XXXV,  Sec.  8. 


THE  EXCHANGE  AND  ITS  CONSTITUTION 

The  publication  of  an  advertisement  of  other  than  a 
strictly  legitimate  business  character  is  prohibited.1 

Rules  as  to  irregularity  in  securities,2  disagreement 
in  terms  of  contracts,3  disorderly  conduct,4  minutes, 
visitors,the  reading  of  communications  to  the  Exchange,5 
responsibility  for  losses  made  by  comparison,6  will  be 
found  in  the  Appendix. 

Additions,  alterations  and  amendments  to  the  con- 
stitution may  be  made  by  the  Governing  Committee 
after  consideration  by  the  Committee  on  Constitution. 
When  adopted  by  the  Governing  Committee  they  are 
submitted  to  the  Exchange,  and  become  law  if  not  dis- 
approved within  one  week  by  majority  vote  of  the  entire 
membership.7  No  amendment  of  Article  XVIII  as  to 
the  gratuity  fund  may  be  made  impairing  the  obliga- 
tion of  members  to  contribute  to  that  fund.8 

The  payment  of  interest  by  a  proposing  borrower  of 
money  on  collateral  after  3  p.  M.,  without  actually 
effecting  the  loan,  is  prohibited.9 


Resolution  of  February  9,  1898. 

See  Laws  1913,  ch.  475.     Penal  Law  Sec.  952  infra  p.  208. 
'Art.  XXIX. 
•Art.  XXX. 
4Art.  XXXVI. 
•Art.  XXXVII. 

'Resolution  of  November  9,  1904. 
'Art.  XXXVIII. 
"id. 

An  unauthorized  amendment  of  by-laws  by  the  directors  of  an  ex- 
change is  not  binding  on  the  members. 

Moffatt  v.  Board  of  Trade  (Mo.)  iii  S.W.  894. 
•Resolution  of  October  25,  1889. 

37 


STOCK  EXCHANGE  LAWS 

The  following  important  resolutions  were  passed  by 
the  Governing  Committee  on  February  13,  1913: 

1.  Against  the  carrying  of  an  account  either  for  a 
member  or  non-member,  without  proper  and  adequate 
margin.     Penalty,  suspension  for  one  year. 

2 .  Against  the  improper  use  of  a  customer's  securities  by 
a  member  or  his  firm.     Penalty,  suspension  or  expulsion. x 

3.  Against  reckless  or  unbusinesslike  dealing.2  Pen- 
alty, suspension  or  expulsion,  or,  if  suspended,  ineligi- 
bility  for  reinstatement. 

Gratuity  Fund. 

The  gratuity  fund  in  connection  with  the  Exchange  is 
supported  by  an  original  assessment  of  $10  from  each 
member  on  admission3  and  an  assessment  of  $10  on 
each  member  upon  the  death  of  a  member,4  until  the 
date  of  transfer  of  membership.5 

The  sum  of  $10,000  is  paid  to  the  beneficiaries  of  a 
deceased  member  within  one  year  of  his  death.6  These 
are,  in  their  order, 

(a)  the  widow,  if  no  descendants; 

(b)  the  widow  and  descendants,  one-half  to  each; 

(c)  the  descendants,  if  no  widow;  no  adopted  child 

to  share  if  the  member  leaves  a  widow  or  de- 
scendants; 

'In  reference  to  this  see  also  Chap.  500,  Laws  1913,  Summary  of  Laws 
infra  p.  44. 

2In  reference  to  this  see  also  Laws  1913,  ch.  500.  Penal  Law  sec. 
956  infra  p.  211. 

'Art.  XVII,  Sec.  i. 

4Art.  XVII,  Sec.  2. 

'Art.  XVII,  Sec.  3. 

•Art.  XVII,  Sec.  4. 

38 


THE  EXCHANGE  AND  ITS  CONSTITUTION 

(d)  if  no  widow  or  descendants,  an  adopted  child 

or  children.1 

The  gratuity  cannot  be  mortgaged  or  pledged.2 
The  privilege  does  not  continue  after  transfer  of  mem- 
bership, whether  voluntary  or  involuntary,  nor  after 
expulsion,  but  is  extended  to  suspended  members.3  The 
management  of  the  gratuity  fund  is  in  the  hands  of  seven 
trustees  chosen  for  a  term  of  five  years.4  Various  rules 
regulate  their  powers  and  duties  and  the  election  of 
officers.5 

'Art.  XVII,  Sec.  5. 

'Art.  XVII,  Sec.  7. 

Under  a  similar  by-law  of  the  New  York  Produce  Exchange  the  inter- 
ests of  beneficiaries  are  assignable  as  security  for  the  repayment  of  such 
moneys  as  may  be  paid  by  another  to  keep  alive  such  interests  and 
without  which  they  would  have  been  absolutely  destroyed.  (Holmes  v. 
Seaman,  184  N.  Y.  486,  reversing  99  App.  Div.  624.) 

'Art.  XVII,  Sec.  9. 

4Art.  XIX,  Sec.  i. 

•Art.  XIX,  Sees.  2-13. 

With  loss  of  full  membership  by  failure  to  pay  dues  and  assessments 
for  the  gratuity  fund  a  member's  right  to  the  fund  fell  during  his  life, 
and  he  had  nothing  to  transmit  to  his  representatives. 

MacDowell  v.  Ackley,  93  Pa.  St.  277  (Phila.  St.  Exch.). 

A  rule  of  a  gratuity  fund  provided  that  the  payment  should  be  deemed 
to  be  an  absolute  donation  to  the  payee  designated  by  the  deceased 
member,  free  from  all  other  claim  or  control.  Such  donation  formed  no 
part  of  the  deceased  member's  estate,  and  his  personal  representatives 
had  no  right  of  action  for  it. 

Swift  v.  San  Francisco  St.  &  Exchange  Board,  67  Cal.  567. 

The  gratuity  fund  by-laws  may  be  altered  by  any  reasonable  amend- 
ment, which  means  one  that  does  not  impair  the  member's  vested  rights 
thereunder. 

Parish  v.  N.  Y.  Produce  Exch.,  169  N.  Y.  34. 

A  suspended  member  cannot  question  the  validity  of  amendments 
of  the  gratuity  fund  rules  validly  made. 

MacDowell  v.  Ackley,  93  Pa.  St.  277  (Phila.  St.  Exch.). 

A  rule  giving  the  association  power  to  suspend  a  member,  without 
notice,  for  non-payment  of  his  assessment,  is  not  against  public  policy 
nor  unreasonable. 

People  v.  Board  of  Trade,  224  111.  370. 

39 


PART  II 
SUMMARY  OF  LAWS  AND  DECISIONS 


PART  II 
SUMMARY  OF  LAWS  AND  DECISIONS 

THERE  have  always  been  laws  upon  the  statute 
books  by  which  the  legislature  has  endeavored 
either  to  control  the  conduct  of  stockbrokers  or  to 
throw  around  the  pursuit  of  their  calling  such  safe- 
guards for  the  public  as  would  ensure  fair  dealing. 

Some  of  these  laws  are  of  long  standing.  Quite  a  few 
of  them  were  enacted  undoubtedly  in  response  to  an 
agitation  which  arose  recently.  While  some  of  more 
recent  date  are  mere  declarations,  as  it  were,  of  the 
common  law,  as  it  has  heretofore  existed,  a  few  of  them 
by  supposedly  creating  new  crimes,  place  upon  the 
stockbroker  additional  burdens  and  responsibilities  which 
are  expected  to  secure  a  customer,  and  the  public, 
perhaps,  against  loss  in  its  dealings,  not  so  much  with 
the  stockbrokers  themselves,  as  in  the  general  pursuit 
of  investment  or  even  speculation  in  corporate  shares. 

Whatever  view  one  may  have  as  to  the  necessity  of 
this  legislation,  the  merest  inquiry  will  disclose  that  loss 
through  misconduct  of  stockbrokers  occurs  in  a  very  small 
percentage  of  cases.  In  five  years,  during  which  time 
there  were  on  an  average  eleven  hundred  members  on 
the  New  York  Stock  Exchange,  the  small  number  of 

43 


STOCK  EXCHANGE  LAWS 

nineteen  failures  occurred;  and  in  the  majority  of  these 
cases  the  creditors,  including  the  customers,  were  either 
paid  in  full,  or  received  compromises  to  their  own  satisfac- 
tion, and  so  rehabilitated  the  broker  that  he  was  fairly 
entitled  to  reinstatement. 

The  laws  referred  to  are  numerous  and  some  of  them 
lengthy  and  couched  in  such  legal  phraseology  that  it 
is  deemed  best  that  the  more  important  of  them  should 
be  summarized  so  that  they  may  be  read  by  the  broker 
and  his  customer.  For  the  purpose  of  making  clear, 
if  possible,  what  these  laws  have  been  held  by  the  courts 
to  mean,  references  have  been  made  to  decisions  where 
same  were  obtainable. 

No  scheme  or  order  could  be  devised  for  the  presenta- 
tion of  these  laws;  they  do  not  appear  here  in  the  order 
of  their  importance;  they  have  been  grouped  where  any 
relation  existed  between  them,  and  the  authorities  have 
been  cited  wherever  possible. 

Unauthorized  Pledging  (Hypothecation)  or  Other  Disposi- 
tion of  Customers'  Securities. 

Laws  1913,  ch.  500.  Penal  Law,  Sec.  956.  In  effect 
May  8,  1913. * 

A  broker  who, 

i.  Having  in  his  possession,  for  safekeeping  or  other- 
wise, securities  belonging  to  a  customer,  without  having 
any  lien  thereon  or  any  special  property  therein, 
pledges  or  disposes  thereof  without  the  customer's  con- 
sent; or, 


lFor  full  text  see  infra  p.  211. 

44 


SUMMARY  OF  LAWS  AND  DECISIONS 

2.  Having  in  his  possession  securities  on  which  he 
has  a  lien  for  indebtedness,  pledges  them  for  more  than 
the  amount  due  to  him  thereon,  or  otherwise  disposes  of 
them  without  his  customer's  consent,  and  without  having 
in  his  possession  or  under  his  control  the  equivalent  of 
such  securities,  whereby  the  customer  loses  such  securities 
or  the  value  thereof,  in  whole  or  in  part,  is  guilty  of  a 
felony,  punishable  by  a  fine  of  not  more  than  $5,000 
or  imprisonment  for  not  more  than  two  years,  or  by  both. 

Every  member  of  a  firm  of  brokers,  who  either  does 
or  consents  or  assents  to  the  doing  of  such  an  act,  is 
guilty  as  above. l 

The  first  clause  of  this  section  deals  with  the  unau- 
thorized pledge  or  other  disposition  of  a  customer's 
stocks  held  by  the  broker  on  which  he  has  no  lien. 
The  second  makes  a  felony  what  the  law  previously  re- 
garded as  a  conversion  only, 2  i.e. ,  the  pledging  of  margined 
stock  for  more  than  the  amount  of  the  broker's  advances. 
Even  before  the  enactment  of  the  statute,  if  the  conver- 
sion had  been  made  with  intent  to  steal,  it  would  have 
constituted  larceny.  The  pledger  is  still,  of  course, 
entitled  to  his  civil  remedy.3 

A  broker  who  has  purchased  stock  on  margin  for  a 
customer  may  pledge  the  stock  for  his  advances.4  All 


'See  The  Exchange  and  its  Constitution,  supra  p.  37. 

"Hardy  v.  Jaudon,  i  Rob.  261 

Strickland  v.  Magoun,  119  App.  Div.  113* 

In  re  Tracy,  191  Fed.  810 

'See  infra,  p.  46. 

'Rothschild  v.  Allen,  90  App.  Div.  233,  affirmed  180  N.  Y.  561. 

45 


STOCK  EXCHANGE  LAWS 

that  is  required  of  him  is  to  have  on  hand  the  equiva- 
lent in  kind  and  quantity  of  the  margined  stock.1  He 
may,  it  has  been  held,  sub-pledge  and  borrow  money  on 
margined  stock  en  bloc.2 

It  is  not  conversion  to  transfer  pledged  stock  certifi- 
cates under  an  arrangement  whereby  the  pledgee  re- 
tains control  over  them.3  It  is  not  conversion  for  the 
broker  to  register  in  his  own  name.4 

It  is  conversion  if  the  broker,  holding  stock  certifi- 
cates as  margin  for  his  own  benefit,  rehypothecates 
the  customer's  securities  for  a  greater  amount  than  the 
customer's  indebtedness  to  him,  not  having  in  his 
possession  a  like  amount  of  similar  securities,5  or  if  he 
rehypothecates  them  to  secure  a  different  or  larger  debt 
than  that  for  which  they  were  pledged.6 

An  unauthorized  pledge  may  be  ratified  by  the  owner 
of  stock  by  his  approval  after  the  transaction  is  brought 
to  his  notice.7 

A  broker  holding  stock  as  marginal  security  pledged 
it  for  his  own  debt,  without  his  pledger's  knowledge, 
and  could  not  redeem  the  stock.  The  broker's  pledgee 


iRothschild  v.  Allen,  90  App.  Div.  233,  aff'd  180  N.Y.  561. 

Austin  v.  Hayden  (Mich.)  137  N.  W.  317. 
'Skiff  v.  Stoddard,  63  Conn.  198. 

Austin  v.  Hayden  (Mich.)  137  N.  W.  317. 

But  see  infra  p.  95. 
'Heath  v.  Griswold,  5  Fed.  573. 
'Ritchie  v.  Burke,  109  Fed.  16. 
'Douglas  v.  Carpenter,  17  App.  Div.  329. 
'Smith  v.  Savin,  141  N.  Y.  315. 

Lawrence  v.  Maxwell,    53  N.  Y.  19. 
But  see  Mayer  v.  Monzo,  cited  infra  p.  97. 
'Curtis  v.  Leavitt,  15  N.  Y.  9. 

46 


SUMMARY  OF  LAWS  AND  DECISIONS 

was  held  to  have  a  good  title  to  the  stock  as  against  the 
owner,  though  the  broker  had  been  guilty  of  conversion. l 

Trading  by  Brokers  Against  Customers'  Orders. 

Laws  1913,  ch.  592.     Penal  Law,  Sec.  954.     In  effect 

May  17,  1913. 2 

A  broker  who  trades  against  the  orders  of  a  customer, 
who  has  employed  him  to  buy  and  carry  stocks,  bonds, 
etc.,  on  margin,  is  guilty  of  a  felony,  punishable  by  a 
fine  of  not  more  than  $5,000  or  imprisonment  for  not 
more  than  one  year.  Every  member  of  a  firm  who 
does  or  consents  to  such  an  act  is  guilty  under  this 
section.3 

A  custom  creating  in  the  broker  an  interest  adverse 
to  that  of  his  customer  has  been  disapproved.4 

It  has  been  held  that  a  broker  cannot  act  as  principal 
and  agent  in  the  same  transaction  without  his  custom- 
er's consent.5  Such  dealings  are  held  to  be  contrary  to 
public  policy,  and  the  question  of  fraud  or  injury  to  the 
customer  is  immaterial.6 

Delivery  of  Memoranda  of  Transactions. 
Laws  1913,  ch.  595.     Penal  Law,  Sec.  957.     In  effect 

Sept.  i,  1913. 7 
A  broker  must  deliver  to  his  customer  a  statement  or 


'Whitlock  v.  Seaboard  Nat.  Bank,  29  Misc.  84. 

'For  full  text  see  infra  p.  209. 

'See  The  Exchange  and  its  Constitution,  supra  p.  37. 

'Day  v.  Holmes,  103  Mass.  306. 

'Porter   v.  Wormser,  94  N.  Y.  431. 

Pickering  v.  Demerritt,  100  Mass.  416. 

'Mayre  v.  Strouse,  5  Fed.  483. 

7 For  full  text  see  infra  p.  212. 

47 


STOCK  EXCHANGE  LAWS 

memorandum  of  each  purchase  or  sale  made  for  him, 
containing  a  description  of  the  securities  purchased  or 
sold,  the  name  of  the  person,  firm  or  corporation  from 
whom  they  were  purchased,  or  to  whom  they  were  sold, 
and  the  day,  and  the  hours  between  which  the  trans- 
action took  place.  Refusal  to  deliver  such  a  statement 
or  memorandum  within  twenty-four  hours  after  written 
demand  therefor  by  the  customer,  or  delivery  of  a 
statement  or  memorandum  which  is  false  in  any  mater- 
ial respect,  is  a  misdemeanor,  punishable  by  a  fine  of 
not  more  than  $500  or  imprisonment  for  not  more  than 
one  year  or  both. 

This  statute  is  entirely  new.  It  has  always  been  the 
custom  of  brokers  to  deliver  to  their  customers  a  mem- 
orandum of  transactions  giving  the  above  required  par- 
ticulars, excepting  the  time  of  execution.  It  is  doubtful 
whether  this  provides  any  added  security,  though  in 
case  of  fraud  (bucketing),  the  burden  of  proving  execu- 
tion of  the  order  is  more  easily  shifted  when  it  is  shown 
that  the  notice  erroneously  specifies  the  time. 

Manipulation  of  Prices  of  Securities. 
"Rigging  the  Market." 

Laws  1913,  ch.  253.      Penal  Law,  Sec.  953.    In  effect 

April  10,  1913. * 

Any  person  who  influences  or  attempts  to  influence 
the  market  prices  of  securities  by  means  of  fictitious 
purchases,  sales,  or  other  transactions  or  devices,  is 


'For  full  text  see  infra  p.  208. 

48 


SUMMARY  OF  LAWS  AND  DECISIONS 

guilty  of  a  felony"  punishable  by  a  fine  of  not  more  than 
$5,000,  or  imprisonment  for  not  more  than  two  years,  or 
by  both.1 

The  Anti-Bucket-Shop  Law. 

Penal  Law,  Sec.  3Q0.2 

(i.)  One  who  makes  or  assists  in  making  any  con- 
tract for  the  purchase  or  sale  of  securities  with  the  in- 
tention that  the  contract  shall  be  settled  upon  the  basis 
of  the  market  quotations  on  any  exchange,  and  without 
intending  a  bona  fide  sale ;  or 

(2.)  when  such  market  quotations  shall  reach  a  cer- 
tain figure  without  intending  a  bona  fide  purchase  or 
sale;  or 

(3.)  based  upon  the  differences  in  such  market  quo- 
tations at  which  such  securities  are  bought  or  sold; 
or, 

(4.)  who,  as  proprietor  or  person  in  charge,  conducts 
any  bucket-shop,  or  knowingly  allows  therein  any  con- 
travention of  the  preceding  three  sections,  is  guilty  of 
a  felony. 

Every  broker  must  furnish  to  a  customer  upon 
written  demand  therefor,  a  written  statement  containing 
the  names  of  the  persons  from  whom  the  securities 
have  been  purchased  or  to  whom  they  have  been  sold, 
and  the  time  and  place  of  the  transaction,  and  the  amount 
and  price  thereof.  Refusal  or  neglect  to  do  so  within 


iSee  The  Exchange  and  its  Constitution  supra  p.  25. 
*For  full  text  see  infra  p.  199. 

49 


STOCK  EXCHANGE  LAWS 

forty-eight  hours  after  the  demand  is  prima  facie  evi- 
dence of  violation  of  the  statute.1 

On  conviction  of  a  domestic  corporation  of  a  second 
offense,  the  Supreme  Court  may,  upon  an  action  by  the 
Attorney-General,  dissolve  the  corporation;  in  the  case 
of  a  foreign  corporation,  it  may  restrain  it  from  doing 
business  in  this  state.2 

"Bucket-shop"  is  defined  as  "any  building,  or  any 
room,  apartment,  booth,  office,  or  store  therein,  or  any 
other  place  where  any  contract  prohibited  by"  the 
statute  "is  made  or  offered  to  be  made."3  Keeping  a 
bucket-shop  has  been  made  an  offense  by  statute  in 
Illinois,4 where  it  is  unnecessary  to  prove  the  intention 
of  the  keeper  to  keep  such  a  place.5 

A  customer  is  entitled  to  the  balance  of  his  account 
with  a  "bucket-shop"  as  shown  upon  the  trial  in  an 
action  for  accounting. 

Printed  agreements  on  the  back  of  bought  and  sold 
notes,  for  the  protection  of  the  broker  against  his  liabil- 
ity to  furnish  the  names  of  customers  whose  orders 
were  offset  against  the  plaintiff's  were  held  to  be  un- 
reasonable, against  public  policy,  and  void.6 


'Penal  Law,  Sec.  392. 

'Penal  Law,  Sec.  393. 

'Penal  Law,  Sec.  394. 

See  the  Exchange  and  its  Constitution  supra  p.  26. 

See  also  infra  p.  179. 

'Weare  Commission  Co.  v.  People,  209  111.  528. 

See  also  Peller  v.  Leiter,  189  N.  ¥.361. 

6Soby  v.  People,  134  111.  66. 

Caldwell  v.  People,  67  111.  App.  367. 

'Haight  v.  Haight  &  Freese  Co.,  46  Misc.  501. 

50 


SUMMARY  OF  LAWS  AND  DECISIONS 
Transactions  by  Brokers  After  Insolvency. 

Laws  1913,  ch.  500.  Penal  Law,  Sec.  955.  In  effect 
May  8,  1913. 1 

A  broker  who,  knowing  that  he  is  insolvent,  accepts 
or  receives  from  a  customer  ignorant  of  his  insolvency, 
money,  or  securities  otherwise  than  in  liquidation  of,  or 
as  security  for,  an  existing  indebtedness,  whereby  the 
customer  loses  such  money,  etc.,  in  whole  or  in  part,  is 
guilty  of  a  felony  punishable  by  a  fine  of  not  more  than 
$5,000,  or  imprisonment  for  not  more  than  two  years, 
or  by  both.  A  person  is  insolvent  within  the  meaning 
of  the  statute  whenever  the  aggregate  of  his  property 
shall  not,  at  a  fair  valuation,  be  sufficient  in  amount 
to  pay  his  debts. 

This  law  is  new.  It  is  analogous  to  and  was  no  doubt 
adapted  from  the  provisions  of  the  Penal  Law  which 
provide  that  an  officer  or  employee  of  a  bank  or  an 
individual  or  private  banker  who  receives  a  deposit 
knowing  that  such  bank  or  banker  is  insolvent,  is  guilty 
of  a  misdemeanor,  if  the  amount  or  value  of  the  de- 
posit is  less  than  $25;  and  of  a  felony  if  it  is  $25  or  over 
that  sum. 

A  broker  who  knows  that  another  broker  is  insolvent 
and  imposing  on  his  customers,  and  who  continues  to 
cooperate  with  him  and  assist  him  to  buy  stock  on 
margin,  secured  by  stocks  known  to  belong  to  the  in- 
solvent broker's  customers,  is  liable  equally  with  the 
insolvent  broker  to  his  customers  for  his  acts.2 

'For  full  text  see  infra  p.  210. 

'Austin  v.  Hayden  (Mich.)  137  N.  W.  317. 


STOCK  EXCHANGE  LAWS 

For  a  broker  to  pledge  stock  in  his  hands  fully  paid 
for,  left  with  him  for  safe-keeping,  is  without  color  of 
right,  fraudulent  and  criminal.  (There  is  no  statute 
on  this  subject  in  Michigan.) l 

Discrimination  by  Exchange  or  Members. 

Laws  1913,  ch.  477.  Penal  Law,  Sec.  444.  In  effect 
Sept.  i,  1913. 2 

No  exchange  shall  forbid  or  prevent  its  members 
from  dealing,  at  the  regular  rates  of  commission,  with 
or  for  the  members  of  any  other  exchange,  or  penalize 
or  discipline  any  of  its  members  for  so  doing.  Any 
person  or  corporation  violating  the  statute,  and 
any  member  of  any  exchange  refusing  to  deal  with  a 
member  of  another  exchange,  is  guilty  of  a  misde- 
meanor.3 

Under  this  statute,  in  order  to  be  guilty  of  a  misde- 
meanor, the  member  must  refuse  to  trade  with  a  member 
of  some  other  exchange  on  the  ground  that  he  is  a  member 
of  such  exchange.  Presumably  he  might  legally  refuse 
for  any  other  reason  he  chose.4 


^Austin  v.  Hayden  (Mich.)  137  N.  W.  317,  323. 

'For  full  text  see  infra  p.  203. 

'See  The  Exchange  and  its  Constitution  supra  p.  27. 

'The  question  arose  before  the  statute  was  passed  and  it  was  held 
that  a  resolution  of  the  Governing  Committee  of  the  Exchange  pro- 
hibiting business  with  members  of  the  Consolidated  Exchange,  not  being 
adopted  through  any  bad  motives,  but  to  protect  its  own  interest,  was 
not  an  illegal  combination  in  restraint  of  trade,  in  violation  of  Laws 
of  1890,  p.  1514,  chap.  690. 

Heim  v.  N.  Y.  Stock  Exchange,  64  Misc.  529,  aff'd  138  App.  Div. 
96. 

5* 


SUMMARY  OF  LAWS  AND  DECISIONS 

Validity  of  Certain  Agreements  Made  Without 
Consideration. 

Personal  Property  Law,  Sec.  33.* 
An  agreement  for  the  purchase,  sale,  transfer  or  de- 
livery of  a  certificate  of  stock  or  other  evidence  of 
municipal  or  corporate  debt,  is  not  void  or  voidable  for 
want  of  consideration,  or  because  the  vendor,  at 
the  time  of  making  the  contract,  is  not  the  owner  or 
purchaser  of  the  certificate  or  other  evidence  of 
debt.2 

A  contract  in  futures  is  not  illegal,  even  if  it  takes  the 
form  of  a  short  sale  or  an  option  contract,  except  where 
there  is  no  intention  on  either  side  to  deliver  or  receive 
the  stock,  but  the  contract  is  merely  one  in  differences. 
Short  selling  has  been  held  valid  in  New  York  in  numer- 
ous cases,  and  the  statute  of  1856  authorizing  it  is 
still  in  force.3  If  it  was  understood  by  both  parties 
that  there  was  to  be  no  transfer  of  stock,  but  a  mere 


»For  full  text  see  infra  p.  213. 

'(Former  Pers.  Prop.  L.  Sec.  22;  originally  revised  from  L.  1858* 
ch.  134.) 

'Pers.  Prop.  Law.  Sec.  33. 
Mcllvaine  v.  Egerton,  2  Rob.  422. 
Tyler  v.  Barrows,  6  Rob.  104. 
Stanton  v.  Small,  3  Sandf.  230. 
Cassard  v.  Hinman,  i  Bosw.  207. 
Fletcher  v.  Dold  Packing  Co.,  169  N.  Y.  571. 
Kingsbury  v.  Kirwan,  43  Super.  Ct.  451,  affirmed  77  N.  Y.  612. 
Zeller  v.  Leiter,  114  App.  Div.  148. 
Springs  v.  James,  137  App.  Div.  no. 
White  v.  Smith,  54  N.  Y.  522. 
Barber  v.  Ellingwood,  144  App.  Div.  512. 
Campbell  v.  Wright,  8  N.  Y.  St.  Rep.  471. 
Sterling  v.  Jaudon,  48  Barb.  459. 
Lazare  v.  Allen,  20  App.  Div.  616. 

53 


STOCK  EXCHANGE  LAWS 

gambling  in  differences,  the  transaction  is  a  wager  and 
invalid. l 

Options  in  futures  were  held  lawful,  provided  there 
was  a  bona  fide  intention  to  make  a  sale.2 

In  Illinois  and  other  states  there  are  statutes  pro- 
hibiting options  absolutely.3  Such  statutes  have  been 
held  valid  as  an  exercise  of  the  police  power.4 

A  broker  knowing  the  transaction  to  be  a  gambling 
one  and  illegal,  cannot  recover  for  his  commissions  and 
advances;5  and  margin  deposited  on  such  an  illegal 
transaction  cannot  be  recovered  back,6  although  in  some 
states,  as  in  Illinois,  this  is  permitted  by  statute.7 

In  the  absence  of  a  statute,  unlawful  intention  on  the 
part  of  one  only  of  the  parties  does  not  make  the  trans- 
action illegal.8 


'Bigelow  v.  Benedict,  70  N.  Y.  202. 

West  v.  Wright,  86  Hun,  436. 

Peck  v.  Doran  etc.  Co.,  46  Hun,  454. 

La  Gar  v.  Carey,  12  N.  Y.  St.  Rep.  171. 

Kurd  v.  Taylor,  181  N.  Y.  231. 

Weld  v.  Cable  Co.,  199  N.  Y.  88. 

*Story  v.  Salomon,  71  N.  Y.  420. 

Bigelow  v.  Benedict,  70  N.  Y.  202. 

Brown  v.  Hall.  5  Lans.  177. 

Kingsbury  v.  Kirwan,  77  N.  Y.  612. 

'Minnesota  Lumber  Co.  v.  Whitebreast  Coal  Co.,  160  HI.  85. 

Pearce  v.  Foote,  113  111.  228. 

'Logan  v.  Tel.  etc.  Co.,  157  Fed.  570. 

'Dwight  v.  Badgley,  75  Hun,  174. 

Fuller  v.  Tel.  etc.  Co.,  117  App.  Div.  352. 

•Staples  v.  Gould,  9  N.  Y.  520. 

Crummey  v.  Mills,  40  Hun,  370. 

'Kruse  v.  Kennett,  181  111.  199. 

"Hentz  v.  Minor,  18  N.  Y.  Supp.  880. 

Kingsbury  v.  Kirwan,  43  N.  Y.  Super.  Ct.,  451,  aff'd  77  N.  Y.  612. 

54 


SUMMARY  OF  LAWS  AND  DECISIONS 

Dealing  in  futures  where  there  is  no  intention  on  either 
side  of  delivery  or  acceptance  of  the  stock  was  made 
an  offense  by  Laws  1889,  c.  428. l 

Prior  to  that  time  it  was  held  that  though  such  a  con- 
tract was  one  of  wager,  and  not  binding  upon  the  parties, 
it  did  not  violate  the  provisions  of  Sec.  343  (now  Sec. 
973)  of  the  Penal  Law  providing  that  the  keeping  of  a 
room,  etc.,  for  gambling  or  any  purpose  or  in  any  manner 
forbidden  by  the  article,  was  a  misdemeanor.2 

Brokerage  on  Loans. 

General  Business  Law,  Sec.  38o.3 
Brokerage  on  procuring  of  loans  is  limited  to  the  rate 
of  fifty  cents  per  $100,  except  loans  on  real  estate  se- 
curity; and  to  thirty-eight  cents  for  making  or  renew- 
ing any  bond,  bill,  note  or  other  security  given  for  or 
concerning  the  same. 

Any  excess  paid  may  be  sued  for  and  recovered  by 
the  payer  within  one  year  after  payment,  failing  which 
the  overseers  of  the  poor  of  the  city  or  town  where  the 
offense  was  committed  may,  within  one  year,  sue  for 
and  recover  the  same.4  The  repayment  and  return  of 
the  excess  with  payment  of  the  costs  of  such  suit  is  a 
bar  to  further  penalties.5 


'People  v.  Wade,  59  N.  Y.  Supp.  846. 

'People  v.  Todd,  51  Hun,  446. 

'For  full  text  see  infra  p.  234. 

«Gen.  Bus.  Law,  Sec.  381. 

'Gen.  Bus.  Law,  Sec.  382. 

Buchanan  v.  Tilden,  18  App.  Div.  123. 

Corp.  v.  Brown,  2  Sand.  293. 

55 


STOCK  EXCHANGE  LAWS 

The  statute  is  not  limited  to  loan  brokers.1  The  stat- 
ute applies  to  all  loans  without  regard  to  time.2 

Compensation  for  other  services  should  be  separated 
from  the  brokerage  fee,  so  that  it  may  be  seen  that  it  is 
not  merely  a  cover  for  demanding  unlawful  commission.3 

Advances  on  Collateral  Security.     (Usury.) 
Laws  1882,  ch.  237.     General  Business  Law,  Sec.  37Q.4 

It  is  lawful  to  receive  or  contract  for  any  sum  to  be 
agreed  upon  in  writing  by  the  parties  as  compensation 
for  advances  of  money,  payable  on  demand,  of  $5,000  or 
more,  upon  warehouse  receipts,  bills  of  lading,  cer- 
tificates of  stock,  certificates  of  deposit,  bills  of  ex- 
change, bonds  or  other  negotiable  instruments,  pledged 
as  collateral  security.5 

A  demand  note  for  $5,500,  of  which  $500  was  com- 
pensation for  the  loan,  secured  by  the  pledge  of  certi- 
ficates of  stock,  was  held  to  be  within  the  statute,  and 
not  void  for  usury.6 

Broad  v.  Hoffman,  6  Barb.  177. 

Cook  v.  Phillips,  56  N.  Y.  310. 

Brown  v.  Post,  6  Robt.  in. 

Vanderpool  v.  Kearns,  2  E.  D.  Smith,  170. 

Woodward  v.  Stearns,  10  Abb.  Pr.  N.  S.  395. 

»Buchanan  v.  Tilden,  18  App.  Div.  123. 

2Cook  v.  Phillips,  56  N.  Y.  310. 

Broad  v.  Hoffman,  6  Barb.  177. 

"Cook  v.  Phillips,  56  N.  Y.  310. 

4For  full  text  see  infra  p.  233. 

6In  the  following  cases  loans  were  held  not  usurious  under  this  statute: 

Wright  v.  Toomey,  137  App.  Div.  401. 

Hawley  v.  Kountze,  6  App.  Div.  217. 

Frost  v.  Stokes,  55  N.  Y.  Super.  Ct.  76. 

In  re  Wilde,  133  Fed.  562. 
'Wright  v.  Toomey,  137  App.  Div.  401. 

56 


SUMMARY  OF  LAWS  AND  DECISIONS 

A  borrower  gave  his  demand  note  for  $15,000,  with 
interest  at  six  per  cent,  and  pledged  14  shares  of  stock 
as  collateral,  also  giving  an  agreement  to  sell  to  the 
lender,  at  the  latter's  option,  4  shares  of  the  stock  at 
$2,000  a  share,  which  it  was  claimed  was  less  than  its 
actual  value.  It  was  held  to  be  within  the  statute  and 
not  usurious. l 

Frauds  in  Organization  of  Corporations. 
Penal  Law,  Sec.  66o.2 

A  person  who, 

(i.)  Without  authority  subscribes  the  name  of  an- 
other to  or  inserts  the  name  of  another  in  any  pros- 
pectus, circular  or  other  advertisement  or  announce- 
ment of  any  corporation,  etc.,  with  intent  to  permit  the 
same  to  be  published  and  so  to  lead  persons  to  believe 
that  such  person  whose  name  is  used  is  an  officer,  agent, 
member  or  promoter  of  such  corporation;  or, 

(2.)  Signs  the  name  of  a  fictitious  person  to  any  sub- 
scription for  or  agreement  to  take  stock  in  any  cor- 
poration, existing  or  proposed;  or, 

(3.)  Signs  to  any  such  subscription  or  agreement  the 
name  of  any  person,  knowing  that  such  person  does  not 
intend  to  comply  therewith,  or  under  any  understanding 
or  agreement  that  its  terms  are  not  to  be  enforced;  is 
guilty  of  a  misdemeanor. 

It  has  been  held  in  England  to  be  a  gross  fraud  upon  the 
public  for  company  promoters  to  induce  men  of  character 

'Hawley  v.  Kountze,  6  App.  Div.  217. 
Tor  full  text  see  infra  p.  204. 

57 


STOCK  EXCHANGE  LAWS 

and  financial  standing  to  lend  the  use  of  their  names  as 
directors  on  a  promise  of  indemnity  from  responsibility. l 
It  has  frequently  been  held  that  subscriptions  pri- 
vately agreed  to  be  for  collateral  purposes  only,  such  as 
to  make  up  a  deficiency  to  enable  the  company  to  ob- 
tain its  charter,  or  subscriptions  made  to  induce  others 
to  subscribe  or  to  give  credit  to  the  concern,  the  sub- 
scriber to  be  released  from  payment,  are  absolute  and 
binding  subscriptions.2  The  reason  has  been  given  that 
to  release  the  subscription  of  the  particular  subscriber 
would  be  a  fraud  on  the  other  subscribers.3  And  for 
the  very  reason  that  the  subscriber  is  held  not  released, 
such  a  decoy  subscription  is  held  not  available  as  a 
defense  to  any  of  the  other  subscribers.4 

Fraudulent  Issue  of  Stocks  and  Bonds. 

Penal  Law,  Sec.  662. 5 

Any  officer  or  other  servant  of  a  corporation,  who 
wilfully,  with  intent  to  defraud, 

iRe  Life  Assn.  of  England,  34  Beav.  639,  643,  n  Jur.  N.  S.  359,  34 
L.  J.  Ch.  278,  where  Sir  John  Romilly,  M.  R.  said:  "  It  is  obvious  that 
a  more  gross  misrepresentation  can  hardly  be  made  than  holding  out 
to  the  world  that  responsible  persons,  who  have  nothing  at  all  to  do 
with  the  company,  are  directors  of  it." 

2Mangles  v.  Grand  Collier  Dock  Co.,  10  Sim.  519,  16  Eng.  Ch.  519. 

In  re  Gen.  Prov.  Assur.  Co.,  L.  R.  9  Eq.  74. 

Matter  of  Marylebone  Banking  Co.,  3  De  G.  &  S.  21. 

White  Mountains  R.  Co.  v.  Eastman,  34  N.  H.  124. 

Litchfield  Bank  v.  Church,  29  Conn.  137. 

Pickering  v.  Templeton,  2  Mo.  App.  424. 

Blodgett  v.  Morrill,  20  Vt.  509. 

Downie  v.  White,  12  Wis.  176. 

'LaGrange  etc.  Plank  Road  Co.  v.  Mays,  29  Mo.  64. 

'Bach  v.  Tuch,  126  N.  Y.  53. 

Armstrong  v.  Danahy,  75  Hun.  405, 

'For  full  text  see  infra  p.  204. 

58 


SUMMARY  OF  LAWS  AND  DECISIONS 

(i.)  sells,  pledges  or  issues,  or  signs  or  executes  for 
such  purpose,  any  certificate  of  stock,  etc.,  without  prior 
authority  from  the  corporation,  or  contrary  to  its 
charter  or  laws,  or  in  excess  of  its  power;  or, 

(2.)  re-issues,  sells,  pledges,  or  disposes  of  any  sur- 
rendered or  cancelled  certificates  or  other  evidence  of 
transfer  or  ownership  of  such  shares,  is  punishable  by 
imprisonment  for  not  more  than  seven  years,  or  by  a 
fine  not  exceeding  $3,000,  or  by  both. 

An  innocent  purchaser  of  shares  which  are  part  of 
an  over-issue  of  stock  may  recover  damages  from  the 
directors  guilty  of  the  fraud.  The  rule  applies  whether 
the  plaintiff  purchased  directly  from  the  company  or 
from  the  directors  or  in  the  open  market.1  The  cor- 
poration itself  has  remedies,  both  at  law  and  in  equity, 
against  its  officers  or  agents  for  damages  caused  by  the 
illegal  issue  or  over-issue  of  stock.2 

Reporting  or  Publishing  Fictitious  Transactions. 
Laws  1913,  ch.  476.     Penal  Law,  Sec.  951. 3 
The  reporting  or  publishing  of  fictitious  transactions 
in  stocks,  etc.,  or  causing  it  to  be  done,  with  intent  to 
deceive,  is  a  felony  punishable  by  a  fine  of  not  more  than 
$5,000,  or  by  imprisonment  for  not  more  than  two 

iBruff  v.  Mali,  36  N.  Y.  200. 

Shotwell  v.  Mali,  38  Barb.  445. 

Cazeaux  v.  Mali,  25  Barb.  578. 

'Rutland  R.  Co.  v.  Haven,  62  Vt.  39. 

Commonwealth  Bank  v.  Schuylkill  Bank,  i  Pars.  Eq.  Cas.  (Pa.)  180. 

American  Ins.  Cc.  v.  Fisk,  i  Paige,  90. 

Boyce  v.  Grundy,  3  Pet.  210. 

'For  full  text  see  infra  p.  207. 

59 


STOCK  EXCHANGE  LAWS 

years,  or  both.1  Brokers  who,  after  receiving  money 
and  securities  from  a  customer  as  margin,  did  not 
obey  his  instructions  by  making  actual  purchases  and 
sales,  but  reported  to  him  fictitious  transactions,  were 
held  guilty  of  fraud  and  the  customer  was  entitled  to 
recover  his  money  and  securities,  regardless  of  whether 
he  had  suffered  any  loss.  The  continuous  failure  of 
the  transactions  to  be  either  cleared  or  reported  at  the 
Stock  Exchange  raised  a  presumption  that  the  trans- 
actions did  not  occur.2 

False  Statement  or  Advertisement  as  to  Securities. 

Penal  Law,  Sec.  952.  Laws  1913,  ch.  475.  In  effect 
May  9th,  1913. 3 

Any  person  who,  with  intent  to  deceive,  makes,  is- 
sues, or  publishes,  any  false  statement  or  advertise- 
ment as  to  the  value  or  as  to  facts  affecting  the  value 
of  any  securities,  or  as  to  the  financial  condition  of  any 
corporation  issuing,  or  about  to  issue  securities,  is  guilty 
of  a  felony,  punishable  by  a  fine  of  not  more  than  $5,000, 
or  by  imprisonment  for  not  more  than  three  years,  or 
both.4 

This  law  is  very  sweeping,  more  so  than  it  looks  at 
first  sight.  Formerly  the  well-settled  rule  of  law  was, 
and  of  course  remains,  that  if  a  duly  authorized  agent 
of  any  corporation  induces  any  person  to  become  a 


jSeeThe  Exchange  and  its  Constitution,  supra  p.  28. 

Trout  v.  Chisholm,  21  App.  Div.  54, 

'For  full  text  see  infra  p.  208. 

4See  The  Exchange  and  its  Constitution,  supra,  p.  36. 

60 


SUMMARY  OF  LAWS  AND  DECISIONS 

subscriber  to  its  stock  by  fraudulent  misrepresentations 
or  concealments,  the  person  deceived  can  obtain  the 
rescission  of  the  contract  to  take  the  shares.1  This 
is  a  matter  between  the  person  defrauded  and  the 
corporation,  and  the  reasonableness  of  the  rule  is  ap- 
parent. It  has  various  exceptions,  chief  of  which  are 
that  it  is  not  applicable  where  the  rights  of  innocent 
third  parties  have  intervened  owing  to  the  negligence 
of  the  subscriber,  or  where  the  subscriber  could  and 
ought  to  have  informed  himself  as  to  the  facts.2  It  is 
to  be  noticed  that  the  fraud  must  have  been  committed 
by  an  agent  of  the  corporation,  and  by  an  authorized 
agent,  i.  e.,  he  must  have  been  at  the  time  acting  within 
his  authority.3  The  statute  strikes  at  "any  person" 
with  intent  to  deceive.  The  subscriber  may  waive  his 
right  to  rescind  the  contract.4 

Under  the  statute  the  making  of  the  statement,  or 
causing  it  to  be  made,  is  a  felony.  Action  by  the  sub- 
scriber is  unnecessary  and  recourse  against  the  corpora- 
tion is  left  to  the  common  law.  The  fraud,  to  ground  a 
rescission,  must  be  material.5  The  statute  does  not  ex- 
tend to  the  suppression  of  material  facts  in  an  ad- 
vertisement. Under  the  statute  intent  to  deceive  is 
necessary.  To  obtain  rescission  it  is  not  necessary. 
The  statute  strikes  at  making  statements;  therefore 


»Willets  v.  Poor,  141  App.  Div.  743. 

Custar  v.  Titusville  Gas  etc.  Co.  63  Pa.  St.  381. 

'In  re  Furniture  Co.,  170  Fed.  485. 

'Robinson  v.  Pittsburgh  etc.  R.  Co.,  32  Pa.  St.  334. 

'Ruggles  v.  Brock,  6  Hun,  164. 

'Willets  v.  Poor,  141  App.  Div.  743. 

6l 


STOCK  EXCHANGE  LAWS 

oral  statements  are  included.  It  has  been  expressly 
decided  by  several  cases  that  mere  puffing  or  exag- 
geration as  to  the  value  of  the  company's  property  or 
prospects  will  not  ground  a  rescission  if  there  is  no  mis- 
statement  of  material  existing  facts.1  The  statute 
covers  "any  statement  or  advertisement  as  to  the  value 
or  as  to  facts  affecting  the  value"  of  the  stock  contain- 
ing any  material  representation,  prediction  or  promise 
knowing  or  having  reasonable  ground  to  believe  the 
same  to  be  false.  The  false  statement  must  still  be 
material. 

Inserting  advertisements  in  newspapers  for  the  pur- 
pose of  depressing  the  marke>*value  of  the  stock  of  a 
corporation  is  punishable  as  a  misdemeanor  under 
Section  435  of  the  Penal  Code.2 

Transfers  of  Certificates  and  Shares  of  Stock. 
Personal  Property  Law,  Art.  VI. 

Sec.  162.  How  title  to  certificates  and  shares  may  be 
transferred,  (a.)  By  delivery  of  the  certificate  indorsed 
either  in  blank  or  to  a  specified  person  by  the  person 
appearing  by  the  certificate  to  be  the  owner  of  the 
shares,  or  (b)  by  delivery  of  the  certificate  and  a  sep- 
arate written  assignment  by  such  person. 

Sec.  163.  The  powers  of  those  lacking  full  legal  ca- 
pacity and  of  fiduciaries  are  not  enlarged. 


iTJnion  Nat.  Bank  v.  Hunt,  76  Mo.  439. 

Denton  v.  Macneil,  L.  R.,  2  Eq.  352. 

Kisch  v.  Venezuela  Cent.  R.  Co.,  34  L.  J.  Ch.  545. 

Thornburgh  v.  Newcastle  etc.  R.  Co.,  14  Ind.  499. 

'People  v.  Goslin,  67  App.  Div.  16,  affirmed  171  N.  Y.  627. 

62 


SUMMARY  OF  LAWS  AND  DECISIONS 

Sec.  164.  Corporations  are  not  prevented  from  treat- 
ing the  registered  holder  of  shares  as  owner  in  regard 
to  dividends,  voting,  calls  and  assessments. 

Sec.  165.  The  certificate  delivered  endorsed  or  with 
a  separate  transfer  extinguishes  the  title  of  a  transferee 
under  power  of  attorney  or  assignment  not  written  on 
the  certificate. 

Sec.  166.  The  delivery  is  effectual  although  by  one 
having  no  right  of  possession  or  authority  from  the 
owner  of  the  certificate. 

Sec.  167.  The  endorsement  is  effectual  in  spite  of 
fraud,  duress,  mistake,  revocation,  death,  incapacity, 
or  lack  of  consideration  or  authority. 

Sec.  168.  Rescission  of  transfer  may  be  made  for 
the  reasons  mentioned  in  Sec.  167  unless  the  certificate 
has  been  transferred  to  a  purchaser  for  value  without 
notice,  or  in  the  case  of  waiver  or  laches  by  the  injured 
party. 

Sec.  169.  Rescission  of  the  transfer  of  a  certificate 
does  not  invalidate  subsequent  transfer  by  .transferee 
in  possession  to  purchaser  for  value,  who  takes  in  good 
faith,  and  the  latter  obtains  good  title  to  the  certificates 
and  the  shares  represented  thereby. 

Sec.  170.  Delivery  of  an  unendorsed  certificate,  with 
intent  to  transfer  it,  imposes  an  obligation  to  indorse  it 
upon  the  person  making  the  delivery. 

Sec.  171.  An  ineffectual  attempt  to  transfer  amounts 
to  a  promise  to  transfer. 

Sec.  172.  Warranties  —  On  the  transfer  of  stock 
the  law  implies  certain  warranties.  They  are  (a)  that 

63 


STOCK  EXCHANGE  LAWS 

the  certificate  is  genuine,  (b)  that  the  transferor  has  a 
legal  right  to  transfer  it,  and  (c)  that  he  does  not  know 
of  any  fact  impairing  its  validity. 

Sec.  173.  The  holder  for  security  of  a  certificate 
demanding  payment  of  the  debt  for  which  it  is  security 
does  not  warrant  its  genuineness  or  value. 

Sec.  174.  No  attachment  or  levy  upon  shares  shall  be 
valid  unless  the  certificate  is  seized  or  surrendered  or 
transfer  enjoined  by  the  holder. 

Sec.  175.  A  creditor  is  entitled  to  the  same  aid  from 
the  courts  in  reaching  certificate  owned  by  his  debtor 
as  in  the  case  of  property  not  readily  attached  or  levied 
upon  by  ordinary  process. 

Sec.  176.  No  corporation  shall  have  a  Hen  upon 
shares  of  stock  represented  by  a  certificate,  nor  restrict 
the  transfer  of  its  stock  by  any  by-law  or  otherwise, 
unless  corporation's  right  to  such  lien  or  restriction  is 
stated  upon  the  certificate. 

Sec.  177.  The  alteration  of  the  certificate  whether 
fraudulent  or  not  does  not  divest  the  owner's  title  to  the 
shares,  originally  held,  and  he  can  transfer  good  title 
to  the  certificate  and  the  shares  originally  represented 
thereby. 

Sec.  178.  The  court,  in  a  proceeding  brought  for 
that  purpose,  may  order  a  corporation  to  issue  a  new 
certificate,  in  place  of  one  lost  or  destroyed,  upon  the 
giving  of  a  proper  bond.  The  corporation  is  not 
released  from  liability  to  a  purchaser  for  value  and  in 
good  faith  of  original  certificate,  who  had  no  notice  of 
the  proceedings. 

64 


SUMMARY  OF  LAWS  AND  DECISIONS 

Sees.  179-180.     Unimportant. 

Sees.  181-182-183.  Definitions  of  "endorsement," 
"person  appearing  to  be  the  owner"  of  a  certificate, 
"certificate,"  "delivery,"  etc. 

Sec.  184.  Article  applies  only  to  certificates  issued 
after  its  taking  effect,  Sept.  i,  1913. 

This  statute  is  new.  It  is  substantially  in  the  form 
prepared  by  the  commissioners  for  the  promotion  of 
uniformity  of  legislation  in  the  United  States.  It  is  the 
result  of  the  recognized  necessity  of  having  uniform  laws 
affecting  the  transfer  of  stocks  sold  and  otherwise  dis- 
posed of  throughout  the  country  and  of  having  uniform- 
ity in  the  warranties  to  be  implied  against  persons 
making  transfers  and  in  the  presumptions  arising  in 
connection  with  such  transfers. 

Stock  Transfer  Tax  Law. 
Tax  Law,  Article  XII.1 

A  tax  is  imposed  on  all  sales,  or  agreements  to  sell, 
or  memoranda  of  sales  of  stock,  and  upon  all  deliveries 
or  transfers  of  shares,  or  certificates  of  stock,  whether 
made  upon  the  books  of  the  company  or  by  an  assign- 
ment in  blank,  or  by  delivery,  or  by  any  paper, 
intermediate  or  final,  whether  transferring  the  bene- 
ficial or  legal  title  to  or  merely  the  possession  or  use  of 
the  stock,  of  two  cents  per  $100  or  fraction  thereof. 
The  transferor  must  affix  the  stamps  and  pay  the  tax. 
Agreements  evidencing  the  deposit  of  stock  certificate 
collateral  for  loans  are  exempt,  as  well  as  the  certifi- 

'For  full  text  see  infra  p.  236. 

65 


STOCK  EXCHANGE  LAWS 

cates  themselves.  If  the  transaction  is  shown  by  the 
company's  books  the  stamp  must  be  placed  upon  the 
books  by  the  company,  on  its  being  furnished  by  the 
transferor;  if  made  by  delivery  or  transfer  of  a  cer- 
tificate the  surrendered  certificate  must  be  stamped;  in 
cases  of  agreement  to  sell,  or  delivery  of  the  certificate 
assigned  in  blank  the  seller  must  deliver  to  the  buyer 
a  duly  stamped  bill  or  memorandum  of  the  sale. 
Every  bill  or  memorandum  of  sale  or  agreement  to  sell 
must  show  the  date  of  the  transaction,  the  seller's  name, 
the  stock  concerned,  and  the  number  of  shares.1 

Adhesive  stamps  are  prepared  and  sold  by  the  State 
Comptroller.2  Failure  to  affix  or  furnish  the  stamps 
by  the  persons  described  in  Section  270  is  a  misdemeanor 
punishable  by  a  fine  of  $500  to  $1,000,  or  imprisonment 
for  not  more  than  six  months,  or  by  both.3  The  stamp 
must  be  cancelled  by  the  person  affixing  it  by  writing 
or  stamping  the  initials  of  his  name  and  the  date  of 
using,  and  cutting  or  perforating  the  stamp  so  that  it 
cannot  be  used  again.  Failure  to  cancel  the  stamp 
is  a  misdemeanor  punishable  by  a  fine  of  $200  to 
$500,  or  imprisonment  for  not  less  than  six  months, 
or  both.4 

The  wilful  removal  or  alteration  of  the  cancelling 
marks  on  a  stamp,  or  permitting  that  to  be  done,  with 
intent  to  use  the  stamp  again,  or  the  buying,  preparing 


'Sec.  270. 
'Sec.  271. 
'Sec.  272. 
4Sec.  273. 

66 


SUMMARY  OF  LAWS  AND  DECISIONS 

for  use,  using,  possessing  or  suffering  to  be  used  any 
washed,  restored  or  counterfeit  stamp,  or  intentionally 
removing,  or  causing  or  knowingly  permitting  to  be 
removed  any  affixed  stamp  is  a  misdemeanor,  punish- 
able by  a  fine  of  $500  to  $1,000,  or  imprisonment  for 
not  more  than  a  year,  or  both. 1 

Brokers  must  keep  at  some  accessible  place  within 
the  state  a  book  of  account  to  contain  the  dates  of  every 
sale,  agreement  to  sell,  delivery  or  transfer  of  shares  or 
certificates  of  stock,  the  name  of  the  stock,  the  names  of 
the  transferor  and  the  transferee  and  the  number  and 
face  value  of  the  adhesive  stamps  affixed.  Companies 
must  keep  stock  certificate  books,  books  of  account,  and 
transfer  ledgers  or  registers  for  the  entry  of  similar  de- 
tails of  transfers  and  stamps.  They  must  also  retain 
all  their  books  of  account,  transfer  ledgers,  registers, 
and  stock  certificate  books,  and  all  surrendered  or 
cancelled  shares  or  stock  certificates,  and  all  memo- 
randa relating  to  sales  or  transfers  thereof  for  at  least 
two  years.  These  must  be  open  to  examination  by  the 
Comptroller  or  his  representative  at  all  times  between 
10  A.  M.  and  3  p.  M.  except  Saturdays,  Sundays  and 
holidays.  The  Comptroller  may  bring  action  for  any 
unpaid  tax  and  penalties.  Failure  to  keep  such  records, 
or  the  alteration,  cancellation,  obliteration  or  de- 
struction of  any  part  of  them,  or  the  making  of  false 
entries  therein,  or  the  refusal  to  allow  examination 
thereof  by  the  Comptroller,  is  a  misdemeanor,  pun- 

»Sec,  273, 

67 


STOCK  EXCHANGE  LAWS 

ishable  by  a  fine  of  $500  to  $1,000,  or  imprisonment  for 
from  three  months  to  two  years,  or  both.1 

Violation  of  Sections  270  and  272  entails,  in  addition 
to  the  penalties  therein,  a  civil  penalty  of  $10  for  each 
share  sold  or  transferred.  Violation  of  the  other  pro- 
visions entails  a  civil  penalty  of  $500  for  each  viola- 
tion.2 

The  Stock  Transfer  Tax  Act  (L.  1906,  Ch.  414,  Sec.  i) 
purported  to  amend  the  prior  Stock  Transfer  Tax  Act 
of  1905  by  imposing  a  tax  of  two  cents  "on  each  share 
of  one  hundred  dollars  of  face  value  or  fraction  thereof" 
instead  of  "on  each  hundred  dollars  of  face  value  or 
fraction  thereof."  It  was  declared  invalid  on  account 
of  arbitrary  discrimination,  all  members  of  the  class  of 
corporate  shares  not  being  treated  alike.  Being  void, 
it  did  not  repeal  the  prior  statute.3 

The  Stock  Transfer  Stamp  Tax  Law  of  1905  was  held 
constitutional.  It  was  held  that  the  state  has  power 
to  tax  the  sale  of  stock  of  foreign  corporations  by  citi- 
zens of  the  state  if  the  sale  is  made  within  this  state. 
Ingraham  J.,  in  a  dissenting  opinion,  pointed  out  (p. 
835)  that  "Shares  of  stock  of  incorporated  companies 
are  selected,  and  upon  a  sale  of  such  stock  there  is  im- 
posed a  tax,  not  based  upon  the  value  of  the  property 
or  the  amount  for  which  it  was  actually  sold,  but 
upon  what  is  called  the  face  value  of  the  stock,  a 


lSec.  276. 
*Sec.  277. 

See  The  Exchange  and  its  Constitution,  supra  pp.  30,  31  and  infra 
p.  186. 
'People  ex.  rel.  Farrington  v.  Mensching,  187  N.  Y.  8. 

68 


SUMMARY  OF  LAWS  AND  DECISIONS 

value  which  rarely,  if  ever,  represents  its  true  selling 
value."1 

The  tax  is  payable  where  shares  of  stock  covered  by  a 
mortgage  issued  to  secure  bonds  are  sold  on  foreclosure.2 

The  act  does  not  impose  a  tax  on  the  original  issu- 
ance of  stock.3 

A  provision  authorizing  the  Comptroller  to  secure 
evidence  of  violation  of  the  statute  from  private  books 
and  papers  of  the  party  under  investigation  violates 
Sec.  6  of  Art.  I  of  the  State  Constitution,  providing  that 
no  person  shall  be  compelled  "hi  any  criminal  case  to  be 
a  witness  against  himself."4  The  effect  of  the  section  is 
that  any  sale  or  gift  of  stock  cannot  be  enforced,  whenever 
the  defense  is  properly  pleaded  that  no  tax  stamp  was 
affixed  at  the  time  of  delivery  of  the  certificate  of  stock.5 
The  section  does  not  deprive  the  vendor  of  his  property, 
therefore  is  not  unconstitutional.6 

Trust  certificates  issued  by  a  voting  trustee  are  tax- 
able under  Section  27o.7 

Failure  by  a  vendor  to  pay  the  tax  at  the  time  of  the 
transfer  by  placing  stamps  upon  the  stock  certificates 
will  preclude  him  from  recovering  from  the  vendee  the 
purchase  price,  even  if  his  failure  to  pay  it  was  inad- 

iPeople  ex  rel.  Hatch  v.  Reardon,  no  App.  Div.  821,  affirmed  184 
N.  Y.  431,  affirmed  204  U.  S.  152. 

zGlynn  v.  Conklin,  127  App.  Div.  473. 

'People  v.  Duffy-Mclnnerney  Co.,  122  App.  Div.  336. 

'People  v.  Reardon,  197  N.  Y.  236. 

'Matter  of  Raleigh,  75  Misc.  55. 

'Sheridan  v.  Tucker,  145  App.  Div.  145. 

7U.  S.  Radiator  Corp.  v.  State  of  N.  Y.,  151  App.  Div.  367,aff'd  208 
N.  Y.  144. 

69 


STOCK  EXCHANGE  LAWS 


vertent,  if  the  vendee,  when  sued,  properly  pleads  the 
failure  to  pay  the  tax  as  a  defense.1 


v.  Flint,  204  N.  Y.  153,  affirming  138  App.  Div.  846. 
Sheridan  v.  Tucker,  145  App.  Div.  145. 


PART  III 
THE  BROKER  AND  HIS  CUSTOMER 


PART  III 
THE  BROKER  AND  HIS  CUSTOMER 


relation  between  the  broker  and  his  customer 
JL  has  been  the  subject  of  numerous  decisions  by  the 
Courts  in  this  country  and  in  England.  The  cases  that 
have  arisen  deal  largely  with  either  the  effort  on  the  part 
of  the  broker  to  recover  the  balance  of  his  account  for 
stock-brokerage  as  against  his  customer,  or  with  the 
effort  on  the  part  of  the  customer  either  to  recover  from 
the  broker  securities  purchased  or  deposited  for  margin, 
or  to  obtain  their  value,  upon  the  theory  that  the  broker 
dealt  with  them  without  complying  with  the  law  in 
regard  to  notice  and  time  and  place  of  sale. 

In  reading  these  decisions,  it  is  apparent,  that  while  a 
considerable  measure  of  natural  justice  entered  largely 
in  determining  the  issues  that  arose,  the  laws  seemed 
to  lean  altogether  in  the  direction  of  protecting  the 
customer.  This  is  accomplished  by  holding  the  broker 
to  the  strictest  performance  of  his  duties  to  his  cus- 
tomer and  visiting  upon  him  a  full  measure  of  responsi- 
bility for  any  dereliction. 

Most  of  the  cases  arrange  themselves  under  the  head 
of  pledger  and  pledgee,  in  which  is  included  those  de- 
cisions dealing  with  the  right  to  hypothecation  and  what 

73 


STOCK  EXCHANGE  LAWS 

amounts  to  conversion.  They  are  presented  here  as 
nearly  as  possible  in  the  sequence  in  which  the  ideas 
arise  when  the  relation  of  stockbroker  and  customer  is 
thought  of,  and  the  whole  is  preceded  by  definitions  of 
those  terms  most  likely  to  be  encountered  in  a  reading 
of  the  reported  cases. 

Definitions. 

Some  judicial  definitions  of  terms  commonly  used 
by  those  who  deal  on  the  Stock  Exchange  follow. 

"MARGIN"  DEFINED. 
"  Margin"  is  security  nothing  more.1 

"SHORT  SALE"  DEFINED. 

A  "short  sale"  is  a  sale  of  stock  which  the  seller  does 
not  possess,  but  which  he  hopes  to  buy  in  at  a  lower 
price  than  that  for  which  he  sells.2 

"BULL"  DEFINED. 

A  "bull"  is  one  who  buys  stock  with  the  expectation 
of  making  a  profit  through  a  rise  of  price;  he  is  then  said 
to  be  "long  of  stock."3 

"OPTION"  DEFINED. 
An  "option"  in  one  sense  denotes  a  future  contract, 


iHopkins  v.  O'Kane,  167  Pa.  St.  478. 
2Baldwin  v.  Flagg,  36  N.  J.  Eq.  57. 
White  v.  Smith,  54  N.  Y.  522. 
Knowlton  v.  Fitch,  52  N.  Y.  288. 
Hess  v.  Rau,  95  N.  Y.  359. 
'5  Am.  &  Eng.  Enc.  Law  2nd  Ed.  18. 
Baldwin  v.  Flagg,  36  N.  J.  Eq.  56. 

74 


THE  BROKER  AND  HIS  CUSTOMER 

in  which  one  side  has  a  right  to  insist  upon  compliance 
with  the  contract  at  any  time  within  a  given  period. 

In  another  sense  it  means  where  one  side  has  a  right 
to  insist  upon  such  compliance  as  to  cancel  the  con- 
tract at  his  election,  such  as  a  "put"  or  a  "call."1 

"PUT"  DEFINED. 

A  "put"  is  judicially  defined  as  the  "privilege  of 
delivering  or  not  delivering"  the  thing  sold.2 

"CALL"  DEFINED. 

A  "call"  is  defined  as  the  "privilege  of  calling  for 
or  not  calling  for"  the  stock  bought,  or  an  option  to 
claim  stock  at  a  fixed  price  on  a  certain  day.3 

"  FLY-POWER"  DEFINED. 

A  "  fly-power  "  is  a  written  assignment  in  the  form 
generally  used  on  the  reverse  of  stock  certificates,  which 
when  signed  and  attached  to  such  certificate,  is  sufficient 
to  transfer  the  same  in  like  manner  as  an  endorsement 
thereon.4 

Good  Faith  and  Care. 
The  stockbroker  is  bound  to  exercise  good  faith  in 


'Jackson  v.  Foote,  12  Fed.  37. 
Bigelow  v.  Benedict,  70  N.  Y.  202 
Story  v.  Salomon,  71  N.  Y.  420. 
"Bigelow  v.  Benedict,  70  N.  Y.  202. 
Asgood  v.  Bander,  75  Iowa,  550. 
'Pixley  v.  Boynton,  79  111.  353. 
Muller  v.  Bensley,  20  111.  App.  530. 
4Carlisle  v.  Norris,  142  N.  Y.  Supp.  393,  396. 

75 


STOCK  EXCHANGE  LAWS 

his  dealings  with  his  customer,1  and  reasonable  skill 
and  diligence,2  but  he  is  liable  only  for  the  reasonable 
care  and  diligence  which  an  ordinarily  prudent  purchaser 
would  exercise.3 

Secret  Profits. 

He  may  not  make  secret  profits  for  himself  out  of  the 
transaction.4  But  as  the  broker  is  not  obliged  to  retain 
the  identical  stock  purchased,  the  purchaser  cannot,  if 
he  orders  a  subsequent  delivery  of  the  stock,  and  pays 
for  it  at  the  contract  price,  recover  a  profit  the  brokers 
have  made  through  being  able  to  secure  the  stock  actually 
delivered  at  a  lower  figure  owing  to  a  fall  in  the  market.5 

Notice  of  Transactions. 
He  must  notify  his  customer  of  the  transactions  made.6 

Broker  Bound  by  Manager's  Acts. 

A  manager  of  a  stockbroker's  office,  as  between  the 
stockbroker  and  a  customer,  is  a  general  agent  of  the 

iHoffman  v.  Livingston,  46  N.  Y.  Super.  Ct.,  552. 

Levy  v.  Loeb,  85  N.  Y.  365. 

Bate  v.  McDowell,  49  N.  Y.  Super.  Ct.  106. 

'Boyle  v.  Henning,  121  Fed.  376. 

Harris  v.  Turnbridge,  83  N.  Y.  92. 

'Peckham  v.  Ketchum,  5  Bosw.  506. 

Gheen  v.  Johnson,  90  Pa.  St.  38. 

'Illingworth  v.  De  Mott,  59  N.  J.  Eq.  8. 

The  customer  may  ratify  the  taking  of  secret  profits  by  failing  to 

object. 

Sprague  v.  Currie,  133  App.  Div.  18. 
'Helm  v.  Ennis,  109  App.  Div.  42. 
•Hoffman  v.  Livingston,  46  N.  Y.  Super.  Ct.  552. 
Tuell  v.  Paine,  39  Misc.  712. 

76 


THE  BROKER  AND  HIS  CUSTOMER 

broker,  who  is  bound  by  the  manager's  acts  done  in 
the  course  of  business  though  he  violates  some  private 
instruction  not  known  to  the  customer.1 

Payment  before  Delivery. 

A  customer  cannot  demand  delivery  of  stock  pur- 
chased by  his  order  until  he  has  paid  or  tendered  the 
price  paid.2 

Prior  Indebtedness. 

A  broker  cannot  apply  the  margin  put  up  on  a  trans- 
action upon  a  prior  indebtedness  which  is  disputed  by 
the  customer.  If  he  does  so,  and  exhaustion  of  margin 
results  in  a  sale,  the  sale  is  unauthorized.3 

Broker  Must  Obey  Definite  Order. 
A  broker  who  fails  to  carry  out  a  definite  order  by 
his  customer  to  buy  or  sell  is,  in  ordinary  circumstances, 
liable  for  any  consequent  loss.4  Brokers  who  have  been 
told  that  a  special  account  in  a  customer's  name  is 
for  another,  are  not  entitled  to  sell  the  stock  to  make  up 

iNewman  v.  Lee,  87  App.  Div.  116. 

For  liability  of  broker  for  acts  of  employee  of  lower  grade  see  Reichard 

v  Hutton,  158  App.  Div.  122. 
'Weir  v.  Dwyer,  114  N.  Y.  Supp.  528,  532. 
'Hurt  v.  Miller,  120  App.  Div.  833. 
*Zimmerman  v.  Heil,  156  N.  Y.  703. 
Allen  v.  McConihe,  124  N.  Y.  342. 
Taylor  v.  Ketchum,  5  Rob.  507. 
Galigher  v.  Jones,  129  U.  S.  193. 
Kilmer  v.  Hutton,  131  App.  Div.  625. 
Picard  v.  Beers,  195  Mass.  419. 
King  v.  Zell,  105  Ind.  435. 
Cochran  v.  Ellis,  107  111.  413. 

Silence  on  receiving  a  communication  is  not  a  direction  to  sell. 
Lynch  v.  Simmonds,  87  N.  Y.  Supp.  420. 

77 


STOCK  EXCHANGE  LAWS 

deficiency  in  the  customer's  own  account.1  A  "stop 
order"  does  not  impose  an  obligation  upon  the  broker  to 
hold  the  stock  until  it  reaches  the  price  named  in  the 
order.  It  is  a  measure  of  protection  which  the  purchaser 
provides  for  himself  against  loss  beyond  a  certain  point 
in  a  fluctuating  market.2 

Broker  May  Buy  Smaller  Quantity  than  Ordered. 

An  ordinary  order  to  purchase  mining  stock  is  not 
an  entire  contract.  The  broker  may  buy  a  smaller 
quantity  than  is  ordered.3 

Keeping  Proper  Accounts. 

It  is  a  broker's  duty  to  keep  proper  accounts  showing 
the  names  of  the  persons  with  whom  he  deals  for  his 
customer.4  Failing  this,  presumptions  of  value  will 
be  against  him.5 

Authorization  to  Sett  Distinguished  from  Order. 

A  customer  in  New  York  dealt  with  brokers  in  Chicago, 
but  the  transactions  were  all  made  by  their  representa- 
tives in  New  York,  V.  &.  A.,  on  the  plaintiff's  direct 
orders.  The  customer  telegraphed  the  brokers,  "I  will 
have  to  let  my  stocks  go,"  whereupon  they  instructed 
V.  &.  A.  to  sell  the  stocks.  The  customer  also  instructed 
V.  &.  A.  to  do  so,  so  that  the  order  was  duplicated.  It 

iConklin  v.  Raymond,  127  App.  Div.  663. 

'Richter  v.  Poe  (Md.),  71  Atl.  420,  424. 

'Marye  v.  Strouse,  5  Fed.  483. 

'Prout  v.  Chisholm,  89  Hun,  108. 

6Bate  v.  McDowell,  49  N.  Y.  Super.  Ct.  106. 

78 


THE  BROKER  AND  HIS  CUSTOMER 

was  held  that  the  customer's  telegram  was  an  authori- 
zation to  sell,  not  an  order,  and  until  the  broker  had  no- 
tified him  of  their  election  to  exercise  the  authority,  the 
customer  was  at  liberty  to  instruct  V.  &.  A.  directly; 
and  the  brokers'  order  was  held  for  their  own  account. 1 

Manner  of  Sale. 

A  customer  gave  a  stop  order  containing  no  directions 
as  to  the  manner  of  sale  of  the  bonds  his  brokers  were 
carrying  for  him.  They  were  sold  between  the  calls 
at  the  Stock  Exchange  at  private  sale  as  government 
bonds  usually  are.  It  was  held  that  the  manner  of  sale 
was  not  open  to  objection  in  the  absence  of  evidence  to 
impeach  its  fairness.2 

Prooj  of  Receipt  of  Order. 

A  customer's  evidence  that  he  mailed  a  letter 
ordering  a  purchase  at  the  opening  market  price  is  in- 
sufficient without  proof  that  the  broker  received  it  in 
time  to  execute  the  order.3 

Pooled  Stock. 

In  a  suit  against  brokers  for  refusing  to  sell  certain 
stocks  purchased  for  the  plaintiff  as  a  member  of  a  pool, 
the  plaintiff  testified  to  an  agreement  that  as  a  member  of 
the  pool  he  might  se.ll  his  stock  at  any  time  on  order,  but 
he  admitted  that  the  right  of  members  of  the  pool  to  sell 
would  render  it  ineffective.  It  was  shown  that  he  was  a 
financial  writer  and  perfectly  familiar  with  the  operation 

'Evans  v.  Wrenn,  93  App.  Div.  346. 
'Porter  v.  Wormser,  94  N.  Y.  431. 
'Birnbaum  v.  May,  58  App.  Div.  76. 

79 


STOCK  EXCHANGE  LAWS 

of  pools  and  syndicates.  It  was  held  that  his  testimony 
that  his  contract  entitled  him  to  sell  his  holdings  was 
so  inconsistent  with  the  necessities  of  a  successful  pool 
agreement  that  a  verdict  in  his  favor  was  against  the 
weight  of  evidence.1  A  pool  member  who  causes  the 
pool  account  to  be  transferred  to  an  account  of  his  own, 
acts  as  agent  of  the  other  members,  closes  the  pool 
account,  and  becomes  individually  liable  thereon.2 

Order  to  Sell  at  Discretion. 

A  broker  may  have  authority  from  his  customer  to  sell 
at  his  discretion.  In  such  a  case  the  customer  cannot, 
without  showing  fraud,  hold  him  liable  for  selling  at  a 
lower  price  than  the  stock  touches  at  other  times.3 

When  Broker  Not  Compelled  to  Sell. 

When  the  customer  is  a  speculator,  in  debt  to  the 
broker  and  in  poor  credit,  the  broker  is  not  liable  for 
refusing  to  obey  his  order  to  sell  and  buy  with  the 
proceeds  other  stocks  which  the  broker  thinks  less  safe 
even  though  these  go  up  afterwards.4  Where  dis- 
cretionary authority  is  given  a  broker  to  sell  he  has  a 
reasonable  time  within  which  to  do  so.  Seven  or  eight 
days  has  been  held  reasonable.5 

Brokers  are  not  obliged  to  sell  stock  on  the  exhaustion 
of  margin.  They  may  hold  it  and  depend  upon  the  custo- 

iRidgely  v.  Taylor  &  Co.,  118  App.  Div.  10. 
*Post  v.  Thomas,  153  App.  Div.  865. 
'Wronkow  v.  Clews,  52  N.  Y.  Super.  Ct.  176. 
'Jones  v.  Gallagher,  3  Utah  54. 
*Davis  v.  Gwynne,  57  N.  Y.  676. 

80 


THE  BROKER  AND  HIS  CUSTOMER 

mer's  liability  without  security,  if  there  is  no  agreement 
that  it  is  to  be  sold  when  the  margin  is  exhausted. 1 

Ratification   of   Unauthorized    Transaction. 

An  unauthorized  purchase  or  sale  may  be  ratified 
by  the  customer.2  But  where  the  customer  was  not 
apprized  of  all  the  facts,  such  as  omitting  to  state  the 
selling  price,  a  delay  of  twelve  days  in  repudiating  the 
transaction  did  not  amount  to  a  ratification.3  A  pur- 
chaser may  ratify  an  unauthorized  purchase  by  agreeing 
to  pay  the  balance  shown  by  statements  to  be  due  by 
him,  by  depositing  stock  to  secure  the  indebtedness, 
and  by  actually  paying  it.4  A  customer  may  ratify 
acts  of  his  brokers  amounting  to  a  taking  of  secret  prof- 
its by  accepting  their  account  stated  and  paying  the 
balance  shown,  without  objection.5 

If  a  customer  ratifies  a  sale  in  ignorance  of  the  facts 
and  the  brokers  send  him  a  second  statement  to  the  effect 
that  the  price  mentioned  in  the  first  is  due  to  a  clerical 
error,  the  customer  may  disaffirm  his  ratification,  but  if 
he  elects  to  continue  the  ratification  he  can  only  recover 
the  price  actually  received.6 


kittle  v.  McClain,  134  App.  Div.  197. 

'Ramsay  v.  Miller,  202  N.  Y.  72. 

Burhorn  v.  Lockwood,  71  App.  Div.  301,  affirmed  177  N.  Y.     539, 

554- 
Rock  v.  Carpenter,  no  N.  Y.  Supp.  261. 

'Burnham  v.  Lawson,  118  App.  Div.  389. 
4Buck  v.  Houghtaling,  no  App.  Div.  52. 
'Sprague  v.  Currie,  133  App.  Div.  18. 
'Stewart  v.  Harris,  101  App.  Div.  181. 

8l 


STOCK  EXCHANGE  LAWS 
Failure  to  Execute  Orders. 

The  customer's  acceptance  of  a  check  in  settlement  of 
the  stockbroker's  account  stated  will  not  ratify  the 
broker's  unauthorized  failure  to  purchase  where  the 
broker  represented  he  had  done  so.1 

Waiver  or  Revocation  of  Order. 

Circumstances  may  show  a  waiver  or  revocation  of 
the  order.  The  question  whether  a  telegram  to  the 
broker,  two  or  three  months  after  an  order  to  sell,  which 
he  had  not  executed,  "Have  you  sold?  Will  they  go 
lower?"  was  a  waiver,  has  been  held  to  be  one  of  fact 
for  the  jury.2 

Customs  and  Usages  and  Rules  of  Stock  Exchange. 

Customers  are  presumed  to  have  authorized  the  broker 
to  carry  through  the  transaction  in  accordance  with  the 
usages  and  customs  of  the  particular  Exchange,  so  far  as 
these  concern  the  manner  of  performing  the  contract, 
although  these  are  not  known  to  the  customer;  and 
this  applies  to  the  rules  of  the  Stock  Exchange  them- 
selves.3 This  has  been  held  to  apply  to  the  following 
customs;  to  sell  stocks  deposited  as  collateral  security 
for  call  loans  at  the  board  on  the  borrower's  failure  to 
pay  on  the  day  demand  is  made,4  of  brokers  to  purchase 


'Des  Jardins  v.  Hotchkin,  142  App.  Div.  845. 
'Stone  v.  Lothrop,  109  Mass.  63. 
'Horton  v.  Morgan,  19  N.  Y.  170. 
Spring  v.  James,  137  App.  Div.  no. 
4Colket  v.  Ellis,  10  Phila.  (Pa.)  375. 

82 


THE  BROKER  AND  HIS  CUSTOMER 

stock  in  their  own  names,  without  disclosing  their 
principals,1  to  close  out  a  transaction  on  the  customer's 
default,2  to  settle  claims  against  defaulting  customers,3 
to  accept  certain  stocks  as  collateral  for  additional  mar- 
gin, imposing  upon  the  broker  the  duty  to  accept  them.4 
But  apparently  the  transaction  must  have  been  on  the 
Exchange.5 

Customs  Disapproved. 

The  following  customs  have  been  disapproved:  to 
make  fictitious  transactions;6  to  sell  stock  deposited 
with  them  as  collateral;7  to  disregard  statutory  enact- 
ments as  to  the  manner  of  conducting  transactions;8 
a  custom  altering,  contradicting  or  adding  to  the  express 
contract;9  a  custom  creating  in  the  broker  an  interest 
adverse  to  that  of  the  customer. 10 

A  customer  is  of  course  bound  where  the  contract  is 
expressly  made  subject  to  the  customs  prevailing  on  tlu 


'Horton  v.  Morgan,  19  N.  Y.  170. 

"Greely  v.  Doran-Wright  Co.,  148  Mass.  116. 

Van  Dusen-Harrington  Co.,  v.  Jungeblut,  75  Minn.  298. 

"There  is  a  well-established  custom  that,  if  a  stock  touches  margin, 

it  is  to  be  sold  for  the  highest  it  will  bring." 

Potter  v.  Malcolm  (1907),  104  N.  Y.  Supp.  760. 

'Lehman  v.  Feld,  37  Fed.  852. 

4Ling  v.  Malcolm,  77  Conn.  517. 

'Ayer  v.  Mead,  13  III.  App.  625. 

•Rosenstock  v.  Tormey,  32  Md.  169. 

'Lawrence  v.  Maxwell,  53  N.  Y.  19. 

"Neilson  v.  James,  9  Q.  B.  D.  546 

•Markham  v.  Jaudon,  41  N.  Y.  235, 

Spear  v.  Hart,  3  Robt.  420. 

"Day  v.  Holmes,  103  Mass.  306. 

83 


STOCK  EXCHANGE  LAWS 

Exchange.1    The  customer  is  entitled  to  presume  that 
the  broker  will  act  within  the  rules  of  the  Exchange.2 

The  Broker  Cannot  Act  for  Buyer  and  Seller. 
A  broker  cannot  act  for  both  buyer  and  seller.3 

The  Broker  Cannot  Buy  Customer's  Stocks. 

He  cannot  act  as  principal  and  agent  in  the  same  trans- 
action without  his  customer's  consent.4  But  headings 
of  notices  of  sale  indicating  that  he  has  done  so  do  not 
prevent  him  showing  that  the  sales  were  actually  made 
to  others.5  The  question  of  actual  fraud  or  injury 
done  his  customer  is  immaterial  if  he  so  acts,  such  deal- 
ings being  held  contrary  to  public  policy.6 

Buying  on  Margin. 

A  speculative  contract  for  the  purchase  and  sale  of 
stocks  on  margin  is  valid.7 

Broker   Must   Purchase   Margined   Stock,    and   Cannot 
Purchase  It  on  Margin  Himself. 

A  broker  must  purchase,  obtain  possession  of,  and  hold 
margined  stocks,  subject  to  his  right  to  pledge  them  for 


ifiaker  v.  Drake,  66  N.  Y.  518. 
'Newman  v.  Lee,  87  App.  Div.  116. 
'Levy  v.  Loeb,  85  N.  Y.  365. 
Rice  v.  Davis,  136  Pa.  St.  439. 
4Porter  v.  Wormser,  94  N.  Y.  431. 
Pickering  v.  Demeritt,  100  Mass.  416. 
'Porter  v.  Wormser,  94  N.  Y.  431. 
•Marye  v.  Strouse,  5  Fed.  483. 
'Richter  v.  Poe  (Md.)  71  Atl.  420. 

84 


THE  BROKER  AND  HIS  CUSTOMER 

his  advances  in  excess  of  the  customer's  margin.  He 
cannot  buy  them  on  margin  from  another  broker,  because 
in  such  a  case  the  securities  would  be  subject  to  that 
broker's  right  to  pledge  them  for  advances  to  him. 1  A 
broker  who  has  bought  on  margin  for  a  customer  cannot 
sell  without  the  customer's  authority  while  he  holds  suf- 
ficient margin.2 

A  contract  between  broker  and  customer  with  refer- 
ence to  margined  transactions  authorized  the  broker  to 
close  when  the  margin  was  "exhausted."  It  was  held 
that  this  meant  "depleted"  or  "impaired,"  and  the 
broker  was  not  required  to  wait  for  a  loss  before  closing. 
"A  margin,"  the  court  said,  "is  intended  for  the  protec- 
tion of  the  broker,  but  if  he  be  compelled  to  postpone  the 
sale  of  the  property  which  he  is  carrying  for  the  customer 
until  he  has  no  margin  left,  it  is  difficult  to  per- 
ceive upon  what  theory  any  adequate  protection  is 
afforded."3 

A  cotton  broker  was  instructed,  when  the  customer  had 
$9,600  to  his  credit  on  his  books,  "  to  hedge  when  margin 
about  exhausted."  The  customer  subsequently  drew 
down  $6,000,  and  the  broker  allowed  cotton  to  go  down 
until  the  remaining  margin  of  $3,600  was  exhausted, 
and  $4,000  in  addition.  It  was  held  that  his  instructions 
covered,  not  only  the  particular  margin  at  the  time,  but 

lDes  Jardins  v.  Hotchkin,  142  App.  Div.  845. 

Mayer  v.  Monzo,  151  App.  Div.  866. 

'Taylor  vs.  Ketchum,  35  How.  Pr.  289,  holding  such  an  unauthor- 
ized sale  to  be  a  conversion,  regardless  of  whether  or  not  notice 
of  it  is  given  to  the  customer. 

See  also  Denton  v.  Jackson,  106  111.  433. 

•Foster  v.  Murphy  &  Co.  (C.  C.  A.),  135  Fed.  47. 

85 


STOCK  EXCHANGE  LAWS 

any  margin  in  the  hands  of  the  brokers  at  any  time  before 
the  close  of  the  trades.1 

Demand  for  Margin. 

Before  closing  a  transaction  on  failure  of  margin, 
either  where  stock  has  been  bought  or  sold  short,  the 
broker  must  first  make  a  demand  on  his  customer  for 
additional  margin.2 

Demand  Must  Be  Specific. 

Such  demands  for  margin  must  be  specific,  definite, 
and  certain.  To  constitute  a  sufficiently  specific  de- 
mand it  must  either  mention  a  particular  sum  or  state 
facts  from  which  a  particular  sum  may  be  ascertained 
with  certainty.3  An  alternative  demand  calling  for  an 
answer  from  the  customer  has  been  held  insufficient.4 

Notice  of  Exhaustion. 

The  New  York  rule  as  to  notice  of  exhaustion  of 
margin  in  the  case  of  stocks  bought  is  different  from  that 
held  in  Massachusetts  and  possibly  in  some  other  juris- 
dictions. In  New  York  notice  of  the  sale  must  be 
given  to  the  customer,  notwithstanding  that  the  broker 
may  have  already  demanded  additional  margin  and 
the  customer  has  not  complied  with  the  demand."3 

•Winston  v.  F.  A.  Longshore  &  Co.,  116  La.  21. 

'Markham  v.  Jaudon,  41  N.  Y.  235. 

Stenton  v.  Jerome,  54  N.  Y.  480. 

Ritter  v.  Cushman,  35  How.  Pr.  284. 

Rogers  v.  Wiley,  14  N.  Y.  Supp.  622,  affirmed  131  N.  Y.  527. 

'Boyle  v.  Henning,  121  Fed.  376. 

*Esser  v.  Linderman,  71  Pa.  St.  76. 

"Gruman  v.  Smith,  81  N.  Y.  25. 

See  also, 

86 


THE  BROKER  AND  HIS  CUSTOMER 

object  to  be  attained  by  giving  the  notice  is  to 
afford  the  debtor  an  opportunity  to  redeem,  and  to  be 
present  at  the  sale  to  see  and  know  that  it  is  fairly  con- 
ducted and  the  property  disposed  of  to  the  best  ad- 
vantage."1 In  other  words,  the  notice  must  be  reason- 
able in  time,  and  definite  as  to  the  place  and  manner  of 
the  sale. 

But  the  rule  is  a  general  one  which  must  be  applied 
to  an  infinite  variety  of  circumstances.  In  a  very  re- 
cent case2  the  conditions  were  exceptional.  "It  was 
a  time  of  tense  excitement,  of  sudden  and  violent  fluctu- 
ations in  prices,  of  veritable  panic  in  which  individual 
judgment  was  torn  from  its  moorings  by  the  impact 
of  popular  frenzy.  Notwithstanding  these  conditions, 
it  was  still  the  duty  of  the  defendants  to  give  the  plain- 
tiff reasonable  notice."3 

Brokers  called,  for  margin,  at  the  office  of  a  customer 
who  was  away  on  his  vacation.  They  did  not  attempt 
to  get  his  address,  which  they  could  have  gotten  from 
Ms  partner.  An  employee  of  the  brokers,  through  whom 
the  customer  did  business  with  them,  had  told  the  cus- 
tomer before  he  started  that  his  account  was  all  right, 
and  that  if  anything  happened  the  employee  would  take 
care  of  it.  The  brokers  closed  out  the  stocks  without 


Taylor  v.  Ketchum,  35  How.  Pr.  289. 
Baker  v.  Drake,  66  N.  Y.  518. 
Fairchild  v.  Flowerfelt,  79  Misc.  42. 
»Wheeler  v.  Newbould,  16  N.  Y.  392,  401. 
*Small  v.  Housman,  208  N.  Y.  115. 
'id.  p.  125. 

8? 


STOCK  EXCHANGE  LAWS 

notice  to  the  customer  of  the  sale.    They  were  held 
liable  for  conversion.1 

Reasonable  Time  to  Make  Good. 

The  customer  is  entitled  to  reasonable  time  to  furnish 
the  additional  margin  demanded.2  One  hour's  notice 
is  not  ordinarily  sufficient;3  one  day's  notice  has  been 
held  sufficient,4  and  two  days'  notice  has  been  held 
sufficient.5  Where  the  customer  was  in  Texas  and  the 
broker  in  New  York  deposit  of  margin  within  two  hours 
after  notice  was  held  good,  even  though  made  after  12 
noon  on  Saturday.6 

Before  selling  for  lack  of  margin  a  broker  must  give 
notice  of  time  of  sale.7 

If  brokers  exercise  ordinary  care  and  reasonable 
efforts  to  give  the  customer  notice  and  are  unable  to  do 
so  through  the  customer's  neglect,  they  are  not  obliged 
at  their  peril  to  find  him  and  give  him  actual  notice  and 
a  reasonable  time  to  make  the  margins  good  before 
selling  the  contracts.8 

Actual  notice  of  the  time  and  place  of  sale  is  only  neces- 
sary when  the  broker  holds  property  in  pledge  for  the 
customer.9 


'Rosenbaum  v.  Stiebel  (1910),  122  N.  Y.  Supp.  131. 

'Boyle  v.  Henning,  121  Fed.  376. 

'Lazare  v.  Allen,  20  App.  Div.  616. 

'Harris  v.  Pryor,  18  N.  Y.  Supp.  128. 

'Stewart  v.  Drake,  46  N.  Y.  449. 

'Langer  v.  Price,  114  App.  Div.  78.  (Cotton  Exchange  case.) 

'Fairchild  v.  Flowerfelt,  79  Misc.  42. 

"Smith  v.  Craig,  151  App.  Div.  648. 

'Smith  v.  Craig,  151  App.  Div.  648,  654. 

Leiter  v.  Thomas,  no  App.  Div.  879. 

88 


THE  BROKER  AND  HIS  CUSTOMER 

A  contract  provided  that  the  customer  should  keep  a 
margin  of  five  per  cent,  and  reserved  to  the  brokers  the 
right  to  sell  at  their  discretion  at  any  time  when  in  their 
opinion  the  condition  of  the  account  warranted  it.  The 
customer's  margin  dropped  below  one  per  cent,  to  his 
knowledge.  It  was  held  that  the  brokers  were  entitled 
to  sell  without  notice.1 

A  broker  may  waive  a  provision  in  his  contract  re- 
serving the  right  to  close  transactions  without  further 
notice  whenever  margins  were  running  out,  either  in 
express  terms  or  by  a  course  of  dealing  giving  the  cus- 
tomer the  right  to  believe  that  this  would  not  be  done.2 

Sufficiency  of  Noticeof  Time  and  Place  of  Sale. 

Where  the  broker  advanced  the  whole  amount  instead 
of  requiring  margin  a  written  notice  to  take  up  the  securi- 
ties or  supply  sufficient  margin  to  carry  them  stated  that 
unless  the  customer  made  suitable  arrangements  "be- 
fore Wednesday  next  (August  13)  we  shall  sell  this  stock 
and  hold  you  responsible  for  the  loss."  It  was  held  the 
notice  was  defective  because  it  contained  no  statement 
as  to  the  time  or  place  of  sale;  and,  in  the  absence  of 
any  agreement  dispensing  with  such  notice,  a  sale  "on 
the  curb,"  the  customer  having  failed  to  respond  on  the 
day  specified,  constituted  a  conversion.3 

On  a  purchaser's  failure  to  pay  for  a  stock  purchased, 

>Estes  v.  Perkins,  137  App.  Div.  367. 

'Miller  &  Co.  v.  Lyons  (Va.),  74  S.  E.  194,  where  the  broker  was 

held  estopped  from  closing  without  notice  by  failing  to  exercise 

or  claim  the  right  during  a  period  of  four  years. 
'Content  v,  Banner,  184  N.  Y.  121. 

89 


STOCK  EXCHANGE  LAWS 

"the  sale  should  be  made  at  some  place  where  all  the 
parties  interested  may  have  an  opportunity  to  attend 
and  see  that  it  is  fairly  conducted."  Ordinarily  it  is 
the  place  where  transactions  of  the  same  description 
are  customarily  made,  and  by  employing  a  stockbroker 
a  customer  impliedly  authorizes  him  to  perform  the 
business  in  the  manner  and  at  the  place  established  by 
custom.  So,  where  the  customer  has  requested  the 
stock  to  be  bought  on  the  curb  it  is  a  fair  inference  that 
it  was  the  intention  of  the  parties  that  the  stock,  if 
sold,  should  be  sold  on  the  curb.1 

A  pledged  stock  was  sold  upon  the  curb  and  the 
pledgees  purchased  it  themselves.  The  agreement  for 
pledge  gave  them  the  right  to  become  purchasers  only 
in  case  the  sale  was  made  "at  brokers'  board  or  at  public 
auction."  The  sale  was  held  to  be  at  neither,  the  curb 
not  constituting  a  "brokers'  board."2 

In  another  case  the  jury,  on  conflicting  evidence, 
was  held  warranted  in  finding  that  brokers  had  assented 
to  their  customer  having  the  whole  day  in  which  to  put 
up  margin  or  arrange  for  taking  care  of  the  shares,  but 
they  sold  the  customer  out  before  one  o'clock  and  thus 
violated  the  agreement  they  had  made.  They  were 
therefore  held  liable  for  damages  for  the  unauthorized 
sale.3 

A  sale  of  stock  took  place  at  two  o'clock  in  the  after- 
noon of  October  24th,  following  two  conversations  on  the 


iWeir  v.  Dwyar,  114  N.Y.  Supp.  528,  531.   (Chicago  Subway  stock.) 

"Manning  v.  Heidelbach,  153  App.  Div.  790. 

'Blaine  v,  Thomas,  103  App.  Div.  600,  153  App.  Div.  790. 

90 


THE  BROKER  AND  HIS  CUSTOMER 

same  day  between  the  customer's  agent  and  a  member 
of  the  firm  of  brokers.  Sales  took  place  on  October 
25th,  apparently  immediately  after  a  similar  conver- 
sation between  the  same  persons  at  10  o'clock  in  the 
forenoon  of  that  day.  The  New  York  Court  of  Appeals 
held  that  the  sufficiency  of  these  notices  should  have 
been  submitted  to  the  jury,  and  was  not  a  question  of 
law  for  the  court.1 

Special  Agreement. 

A  defense  to  an  action  for  damages  for  the  alleged 
unauthorized  sale  of  stock  was  that  the  stock  was  pur- 
chased under  a  special  agreement  by  which  the  cus- 
tomer was  to  keep  on  deposit  with  the  brokers  at  all 
times  a  margin  of  $25^000,  and  that  in  the  event  that 
the  market  price  depreciated  and  the  customer  failed 
to  keep  such  margin  unimpaired  they  were  to  be  at 
liberty  to  sell  the  stock  "without  other  notice  than 
notice  that  said  margin  had  been  reduced,"  and  that 
they  gave  the  customer  every  notice  to  which  he  was 
entitled  by  virtue  of  the  special  agreement  or  by  custom. 
The  principal  question  was  whether  such  a  special 
agreement  had  been  made.  The  jury  found  for  the 
customer,  but  the  Appellate  Division  held  that  their 
verdict  was  against  the  weight  of  evidence,  and  re- 
versed the  judgment.2 

In  a  very  recent  case  it  was  contended  for  the  cus- 
tomer that  after  certain  transfers  of  stock  had  been 


'Small  v.  Housman,  208  N.  Y.  115. 
'Leiter  v.  Thomas,  1 10  App.  Div.  879. 

91 


STOCK  EXCHANGE  LAWS 

made,  the  brokers  gave  a  promise  to  the  agent  of  the 
customer  (the  latter  being  abroad)  that  what  remained 
of  the  customer's  account  would  be  carried  by  the 
brokers  until  the  customer's  return.  It  was  held  that 
though  this  promise,  if  made,  was  probably  not  an  ir- 
revocable contract,  it  could  not  be  ignored  to  the 
prejudice  of  the  customer.  If  the  brokers  by  their 
promise  did  lead  the  customer's  agent  to  believe  that 
he  had  nothing  further  to  fear  until  his  principal's  re- 
turn, they  were  bound  at  least  to  give  reasonable  notice 
of  their  intention  to  retract  this  promise.  Whether 
such  an  arrangement  was  really  made  was  not  a  ques- 
tion of  law  for  the  court,  but  one  of  fact  for  the  jury.1 
Brokers  may  agree  to  buy  and  carry  stock  on  a  nom- 
inal margin.2 

Notice  to  Customer's  Agent. 

Notice  given  to  the  customer's  agent  may  be  sufficient. 

A  customer's  son  was  employed  by  the  stockbrokers 
who  handled  her  account,  which  was  entirely  operated 
by  the  son;  the  customer  never  came  in  contact  with 
the  brokers.  The  customer  went  to  Europe,  leaving  her 
account  in  charge  of  her  son,  and  her  securities  in  a  safe 
deposit  box,  in  charge  of  a  friend,  who  from  time  to  time 
took  securities  from  the  box  and  gave  them  to  the  cus- 
tomer's son,  who  delivered  them  to  the  brokers  in  re- 
sponse to  calls  for  margins.  In  an  action  for  damages  for 
the  conversion  of  certain  of  the  stocks  and  bonds  by  the 
brokers,  it  was  held  that  the  son  was  his  mother's 

'Small  v.  Housman,    208  N.  Y.  115. 
'Keller  v.  Halsey,  202  N.  Y.  588 

92 


THE  BROKER  AND  HIS  CUSTOMER 

general  agent  to  transact  business  with  reference  to  the 
account,  and  that  a  demand  on  the  son  for  further 
margins  was  notice  to  him  and  to  the  customer  that,  if 
they  were  not  furnished,  securities  already  pledged  with 
the  brokers  would  be  sold.1 

Waiver  of  Customer's  Default  in  Complying  with  Demand 
for  Additional  Margin. 

The  broker's  waiver  of  his  customer's  default  in  com- 
plying with  a  demand  for  additional  margin  will  pre- 
vent him  from  being  entitled  to  close  the  transaction 
until  a  new  demand  is  made.2 

Tender  of  Stock. 

In  addition  to  demand  for  additional  margin  and 
notice  of  intention  to  sell,  it  appears  that  the  broker 
must  also,  before  sale,  tender  the  certificates  of  the  stock 
and  demand  payment  of  the  balance  due,  if  there  has 
been  no  waiver  by  the  customer  of  one  or  other  of  these 
requirements.3 

Sale  Without  Demand  and  Notice  a  Conversion. 

The  relation  between  the  broker  and  his  customer  in  a 
transaction  where  stock  is  bought  for  the  latter  on  margin 
is  that  of  pledgee  and  pledger,  and  the  sale  by  a  broker 


v.  Housman,  208  N.  Y.  215. 
'McGinnis  v.  Smythe,  101  N.  Y.  646. 

Rogers  v.  Wiley,  14  N.  Y.  Supp.  622,  affirmed  131  N.  Y.  527. 
Morgan  v.  Jaudon,  40  How.  Pr.  366. 
In  Harris  v.  Pryor,  18  N.  Y.  Supp.  128,  it  was  held  that  the  default 

there  was  not  waived. 
'Stenton  v.  Jerome,  54  N.  Y.  480. 
Quell  v.  Paine,  39  Misc.  712. 

93 


STOCK  EXCHANGE  LAWS 

of  pledged  stock  without  demand  and  notice  is  a  con- 
version. 1 

"Under  the  contract,  arising  by  operation  of  law,  out 
of  the  relation  between  the  parties,  a  sale  of  the  stock 
by  the  brokers  without  notice  of  the  time  and  place  of 
sale,  constituted  a  conversion,  in  the  absence  of  an  agree- 
ment dispensing  with  such  notice  or  providing  for  other- 
wise disposing  of  the  pledged  property."2 

Notice  Not  Necessary  When  Direct  Authorization  to  Sell. 
On  a  request  for  margin  over  the  telephone  the  cus- 
tomer replied,  "If  you  have  to  sell,  sell  out."  It  was 
held  that  this  authorization  relieved  the  broker  from 
the  necessity  of  giving  further  or  written  notice  to  put 
up  more  margin  or  of  the  time  and  place  of  sale.3 

Duty  as  to  Retaining  Stock  Purchased. 
Brokers  need  not  keep  on  hand  the  identical  securities 
purchased  for  their  customer.     Their  duty  is  to  keep 
on  hand,  or  under  their  control,  either  these  securities 
or  a  like  kind  and  amount  of  securities.4 


»Clappe  v.  Taylor,  125  App.  Div.  605. 

Markham  v.  Jaudon,  41  N.  Y.  235. 

Baker  v.  Drake,  66  N.  Y.  518. 

Gruman  v.  Smith,  81  N.  Y.  25. 

Gillett  v.  Whiting,  120  N.  Y.  402. 

Austin  v.  Hayden  (Mich.),  137  N.  W.  317. 

Tomkins  v.  Morton  Trust  Co.,  91  App.  Div.  274. 

'Content  v.  Banner,  184  N.  Y.  121,  124. 

'Pierson  v.  Frenkel,  103  N.  Y.  Supp.  49. 

4Sprague  v.  Currie,  133  App.  Div.  18. 

Shiel  v.  Stoneham,  77  Misc.  125. 

Tomkins  v.  Morton  Trust  Co.,  91  App.  Div.  274. 

Austin  v.  Hayden  (Mich.),  137  N.  W.  317, 

Carlisle  v.  Norris,    142  N.  Y.  Supp.  393. 

94 


THE  BROKER  AND  HIS  CUSTOMER 
Broker's  Right  to  Pledge  Margined  Stock. 

A  stockbroker  who  has  purchased  stocks  on  margin  for 
a  customer  may  pledge  the  stock,  and  his  pledgee  will 
obtain  a  good  lien  thereon,  which  he  may  enforce  by  a 
sale  of  the  stock  without  notice  to  the  customer,  and 
without  incurring  liability  to  him  or  to  the  broker.  A 
broker  who  so  pledges  the  stock  is  bound  at  all  times  to 
keep  himself  in  readiness  to  deliver  the  particular  shares 
or  an  equivalent  number  of  similar  shares  to  the  customer 
whenever  the  latter  offers  to  pay  the  unpaid  portion  of 
the  purchase  price  of  the  stock.  If  the  pledge  made  by 
the  broker  secures  to  the  customer  the  right  to  obtain 
the  stock  from  the  pledgee  upon  payment  of  the  balance 
of  the  purchase  price,  the  pledge  by  the  broker  does 
not  operate  as  a  conversion  of  the  stock,  although  he 
neglects  to  keep  on  hand  an  equivalent  number  of  shares 
of  similar  stock.  But  if  the  broker's  pledgee  sells  the 
stock  without  giving  the  customer  notice  of  the  time  or 
place  of  the  sale,  or  an  opportunity  to  protect  his  interest 
by  depositing  more  margin  (to  which  he  was  entitled  under 
his  contract  with  the  broker)  and  thereafter  the  broker 
refuses  to  comply  with  the  customer's  demand  for  deliv- 
ery of  the  stock  upon  payment  of  the  balance  of  the 
purchase  price,  the  broker  is  guilty  of  a  conversion.1 

Right  to  Pledge  Stocks  En  Bloc. 
In  other  jurisdictions  it  has  been  held  that  a  broker 


iRothschild  v.  Allen,  90  App.  Div.  233,  affirmed  180  N.  Y.  561. 
See  Summary  of  laws,  supra  p.  44. 

95 


STOCK  EXCHANGE  LAWS 

may  sub-pledge  and  borrow  money  on  margined  stocks 
en  bloc.1 

In  New  York  it  has  been  held  that  a  broker  cannot 
mingle  his  customer's  margined  stock  with  other  securi- 
ties and  pledge  the  whole  for  a  larger  amount  than  the 
customer's  indebtedness  on  that  stock,  and  that  to  do 
so  is  a  conversion.  The  basis  of  this  decision  is  shown 
in  the  words  of  the  opinion:  "It  would  not  do  to  say 
that  the  plaintiffs  (the  brokers)  might  go  into  the  market 
and  buy  other  securities  of  a  like  kind  and  amount  on 
payment  or  tender  being  made  by  defendant,  because 
the  plaintiffs  might  not  have  the  funds  to  purchase  the 
new  securities,"  and  all  the  customer  would  have  to  rely 
upon  would  be  the  personal  financial  responsibility  of 
the  brokers.2 

This  doctrine  has  been  much  criticised.  In  a  concurring 
opinion  in  the  same  case,  Patterson  J.  says  that  all  the 
broker  is  required  to  do  is  to  have  shares  under  his  con- 
trol, so  that  when,  in  due  course  of  business,  he  is  called 
upon,  he  can  deliver  without  going  into  the  market  to 
buy.  But  he  continues  that  the  broker  may  pledge  and 
repledge  even  in  bulk  so  long  as  he  has  shares  under 
his  control.3  The  Appellate  Division  has  recently 
refused  to  adopt  the  doctrine  that  it  is  a  conversion 
ipso  facto  to  commingle  stocks  belonging  to  different 


>Skiff  v.  Stoddard,  63  Conn.  198. 

Austin  v.  Hayden  (Mich.),  137  N.  W.  317. 

'Douglas  v.  Carpenter,  17  App.  Div.  328,  332. 

This  case  was  followed  in  Strickland  v.  Magoun,  119  App.  Div.  113. 

See  also  Rothschild  v.  Allen,  90  App.  Div.  233. 

'Douglas  v.  Carpenter,  17  App.  Div.  335. 

96 


THE  BROKER  AND  HIS  CUSTOMER 

customers  and  to  obtain  a  loan  on  all,  in  excess  of  the 
amount  due  from  any  one  of  the  customers  whose  stocks 
are  thus  commingled.1  It  has  been  pointed  out  by 
legal  writers  that  if  the  decision  in  Douglas  v.  Carpenter 
were  strictly  followed  it  would  be  difficult  for  brokers  to 
conduct  their  business  conveniently,  if  at  all.2 

Pledging   Stock. 

A  pledger  of  collateral  security  has  not  a  right,  with- 
out tender  of  payment,  to  demand  a  return  of  the 
collateral.  The  holder  of  the  collateral  has  an  election. 
He  may  sue  without  regard  to  the  collateral  upon  the 
original  indebtedness,or  he  may  apply  the  collateral  with- 
out attempt  to  collect  from  the  original  debtor.  The 
pledger  must  dispose  of  the  debt  before  he  can  dispose 
of  the  lien  and  get  back  his  collateral.3 

The  unauthorized  rehypothecation  of  a  customer's 
stock  purchased  upon  margin  as  collateral  for  a  loan  to 
the  broker  is  a  conversion  for  which  he  is  liable.4 

A  claim  was  made  against  a  pledgee  of  a  certificate 
of  stock  with  the  right  to  rehypothecate  it  for  not  more 
than  the  indebtedness  of  the  pledger.  The  claim  was 
based  on  the  pledgee's  rehypothecating  the  stock  for  an 
amount  in  excess  of  the  pledger's  indebtedness  a  month 
before  the  pledgee  was  adjudged  a  bankrupt,  and  refusing 
to  deliver  the  certificate  in  possession  of  the  receiver 

iMayer  v.  Monzo,   151  App.  Div.  866,  Clarke  J.  dis. 
"'The  right  to  pledge  securities  carried  on  a  margin,"  by  E.  Norton 
in  "The  American  Lawyer,"  Vol.  5,  p.  573. 
'Ketcham  v.  Provost,  156  App.  Div.  477 
'Strickland  v.  Magoun,  119  App.  Div.  113. 

97 


STOCK  EXCHANGE  LAWS 

in  bankruptcy  to  the  pledger  on  tender  of  his  debt.  It 
was  held  that  it  was  predicated  on  the  pledgee's  breach 
of  contract  and  not  for  conversion  and  was  provable  in 
bankruptcy. l 

A  pledgee  of  stock  who  gives  up  possession  to  the 
pledger  without  any  qualification  waives  his  lien.  And 
if  he  accepts  in  return,  as  security,  certificates  standing  in 
the  name  of  a  third  person  as  trustee  for  the  pledger,  he 
holds  the  stock  subject  to  the  trust.2 

Certificates  of  stock  are  not  the  stock  itself,  and  the 
latter  may  be  validly  pledged  without  delivery  of  the 
scrip.  Stock  pledged  with  delivery  of  the  scrip  may  be 
subsequently  pledged  to  another  party  subject  to  the 
prior  lien.  The  possession  of  the  first  pledgee  will  be 
regarded  as  that  of  the  second  through  the  agency  of  the 
former.3 

A  pledger  of  stock  with  a  broker  did  not  sign  the  blank 
power  of  attorney  on  the  assignment  attached  to  the 
certificate,  but  only  wrote  his  name  as  owner  in  the  first 
blank  space.  He  therefore  did  not  part  with  the  title. 
The  broker  sold  it,  without  notice,  at  private  sale.  It 
was  larceny  and  conferred  no  title  on  the  transferee. 
The  pledgee  was  entitled  to  sell  the  stock  only  at  public 
auction  on  notice.4  Had  the  assignment  been  executed 
in  blank  it  would  have  been  payable  to  bearer  and 
an  innocent  purchaser  for  value  without  notice,  at  a 


iWood  v.  Fisk,  141  N.  Y.  Supp.  342. 

'Hick ok  v.  Cowperthwait,  137  App.  Div.  94. 

'First  Nat.  Bank  of  Waterloo  v.  Bacon,  113  App.  Div.  612. 

*Treadwell  v.  Clark,  114  App.  Div.  493,  affirmed  190  N.  Y.  51. 

98 


THE  BROKER  AND  HIS  CUSTOMER 

private  sale  without  notice  to  the  owner  would  have 
obtained  a  good  title.1 

In  an  action  for  conversion  of  securities  (here  pledged 
with  the  defendant)  the  plaintiff  must  show  an  exist- 
ing right  to  immediate  possession  at  the  time  of  the 
alleged  conversion.2 

Pledge  of  securities  deposited  as  margin  is  a  wrongful 
conversion  where  the  broker's  transactions  are  purely 
fictitious  and  he  is  never  liable  to  a  loss  on  the  customer's 
account.3 

Bonds  were  purchased  by  brokers  for  various  customers 
whom  they  treated  as  the  common  owners  thereof.  On 
the  insolvency  of  the  brokers  the  customers  were  held 
entitled  to  the  surplus  proceeds  of  the  bonds  which  had 
been,  without  authority,  pledged  as  collateral  and  sold 
by  the  pledgee  for  the  debt  of  the  brokers.4 

Unauthorized  rehypothecation  as  collateral  is  conver- 
sion for  which  the  broker  is  liable,  but  the  pledgee  may 
obtain  a  good  title  to  the  stock  if  he  acts  in  good  faith 
upon  present  and  valuable  considerations  and  without 
knowledge  of  the  true  owner's  claims.5 

Right  of  Pledgee  from  Broker. 

The  rights  of  a  bona  fide  purchaser  or  pledgee  from  a 
broker  are  based  upon  the  estoppel  of  the  owner  of  the 
stock  in  so  acting  as  to  preclude  him  from  disputing, 

«Treadwell  v.  Clark,  114  App.  Div.  493,  affirmed  190  N.  Y.  51. 

'Byrne  v.  Weinfeld,  113  App.  Div.  451. 

*In  re  Tracy,  191  Fed.  810. 

'Hunt  v.  Marquand,  109  App.  Div.  729. 

'Strickland  v,  Magoun,  119  App.  Div.  113. 

99 


as  against  the  pledgee,  the  existence  or  the  powers  of 
his  bailee,  the  broker.1 

Agreement  to  Carry  Customer's  Account  for  a  Definite 

Period. 

A  broker  may  agree  to  carry  a  customer's  account  for 
a  certain  period  or  until  the  happening  of  a  certain  event 
without  calling  for  additional  margin.  The  closing  of 
the  transaction  before  the  expiration  of  the  time  or  hap- 
pening of  the  event  renders  him  liable  in  damages.2 

A  court  will  not  readily  infer  an  agreement  by  a  broker 
to  carry  stock  until  it  should  decline  to  a  certain  price.3 

Stockbrokers  had  sold  a  stock  short  for  a  customer.  It 
began  to  rise  and  the  customer  wished  to  cover  the  sale 
and  go  long  of  the  stock.  The  stockbrokers  advised  him 
not  to  do  so.  The  customer  took  the  advice  on  the 
stockbrokers'  promise  to  carry  the  account  without  addi- 
tional margin  until  the  customer  could  get  out  without 
loss,  if  the  stock  went  up  to  a  price  specified,  which  would 
have  exhausted  the  margin.  The  stock  continued  to 
advance,  but  did  not  go  above  the  price  named.  The 
stockbrokers  bought  in  at  a  price  which  about  exhausted 
the  margin,  without  notice  to  the  customer.  Upon  re- 
ceiving notice  of  the  purchase  the  latter  repudiated  it. 
The  market  subsequently  declined  and  the  customer  di- 
rected the  stockbrokers  to  buy  to  cover  the  short  sale, 


'Matter  of  Mills,  125  App.  Div.  730. 

'Michael  v.  Hart  (1901),  2  K.  B.  867,  85  L.  T.  Rep.  (N.  S.)  548. 
In  Harris  v.  Pryor,  18  N.  Y.  Supp.  128,  it  was  found  that  there  was  no 
agreement  to  hold  the  stock. 

'Richter  v.  Poe  (Md.),  71  Atl.  420,  424. 

100 


THE  BROKER  AND  HIS  CUSTOMER 

to  sell  the  securities  he  had  desposited  as  margin,  and  to 
account.  This  they  declined  to  do.  In  an  action  by 
the  customer  to  recover  damages,  it  was  held  that  the 
defendant's  promise  to  carry  the  account  without  further 
margin  gave  a  right  to  recover,  whether  considered  as 
an  agreement  with  a  sufficient  consideration  or  as  a 
waiver  of  notice  to  furnish  more  margin,  or  as  an  estoppel. 
In  either  case  the  purchase  was  unauthorized  and  the 
customer  was  entitled  to  recover  the  difference  between  the 
amount  paid  on  such  purchase  and  what  the  stock  might 
have  been  bought  for  when  he  gave  directions  to  pur- 
chase.1 

A  broker  who  purchased  July  wheat  on  margin  for  a 
customer  agreed  to  carry  the  wheat  until  July  ist  with- 
out additional  margin,  and  that  the  deal  should  not  be 
closed  until  the  customer  so  ordered.  This  agreement 
was  held  to  mean  that  the  deal  should  not  be  closed 
before  July  ist  unless  so  ordered.2 

A  contract  to  carry  stock  does  not  oblige  the  broker 
to  carry  it  indefinitely  where  it  does  not  prescribe  a 
period.  Where  a  stock  was  carried  more  than  five  years, 
it  was  held  a  reasonable  time  had  elapsed  before  tender.3 

Sale  at  the  Market. 

In  an  action  for  the  balance  of  an  account  due  to  a 
loss  on  100  shares  of  Steel  common  which  the  plaintiffs 


»Rogers  v.  Wiley,  131  N.  Y.  527,  affirming  14  N.  Y.  Supp.  622. 
*Amsden  v.  Jacobs,  75  Hun,  311. 

See  Gould  v.  Trask,  10  N.  Y.  Supp.  619,  as  to  the  effect  of  the  de- 
posit of  a  note  as  "  temporary  collateral." 
'Kridel  v.  Bloomingdale,  149  App.  Div.  605. 

101 


STOCK  EXCHANGE  LAWS 

were  carrying  for  their  customer  the  plaintiffs  alleged 
that  the  customer,  on  being  asked  for  additional  margin, 
directed  them  to  sell  at  the  market.  The  defendant 
alleged  that  she  directed  them  to  sell  at  45,  and  at  that 
time  the  stock  stood  at  45^.  The  case  turned  on  the 
question  of  fact  as  to  the  directions  given  by  the  pur- 
chaser. The  market,  it  was  held,  meant  the  best  price  that 
could  be  obtained  for  the  stock  at  the  time  the  sale  was 
made,  not  the  price  at  which  the  stock  was  quoted  at 
that  time.  (The  market  was  panicky,  and  the  stock 
was  sold  at  28.)  * 

An  order  to  sell  at  the  market  means  at  the  best  price 
obtainable  at  the  time  the  order  is  executed,  and  not  at 
the  price  quoted  at  the  time  the  order  is  given.2 

Customer's  Death. 

A  broker  had  sold  stock  short  for  a  customer,  borrow- 
ing the  stock  for  delivery  according  to  custom,  from  time 
to  time  as  required.  While  the  transaction  was  so  kept 
alive  the  customer  died.  The  broker  continued  to  keep 
the  speculation  alive  until  the  appointment  of  an  execu- 
trix, upon  whom  the  proper  notice  could  be  served  in 
order  to  close  it.  It  was  held  that  the  broker  was  au- 
thorized to  do  so,  provided  he  acted  in  good  faith.  Being 
himself  obligated  for  the  return  of  the  borrowed  stock, 
he  had  such  an  interest  in  the  transaction  on  account  of 
this  personal  obligation  as  entitled  him  to  continue  it 
until  a  representative  should  be  appointed.  But  it  was 

»Fairbairn  v.  Rausch,  104  App.  Div.  259. 
'Fairbairn  v.  Rausch,  104  App.  Div.  259. 

IO2 


THE  BROKER  AND  HIS  CUSTOMER 

not  meant  that  a  broker  might  not  be  justified  in  clos- 
ing a  stock  transaction  immediately  after  the  death  of 
the  principal.1 

Broker's  Correspondent  His  Agent. 

A  broker's  correspondent  is  the  agent  of  the  broker, 
and  not  of  the  customer,  even  though  the  latter  instructs 
him  directly.2 

Short  Sales. 

Short  selling  (sale  for  future  delivery)  is  valid,  as  dis- 
tinguished from  gambling  in  differences.3 

A  broker  is  bound  to  carry  the  customer's  account  to 
sell  short  for  a  reasonable  time  as  long  as  the  margin 
deposited  remains  good.4  Without  demand  for  addi- 
tional margin  he  cannot  cover  the  sale  without  instruc- 
tions from  the  customer.5  On  an  unauthorized  buying 
in  of  stock  to  cover  the  sale  the  customer  may  repudi- 
ate the  transaction  and  recover  the  margin  deposited.6 
If  the  margin  is  not  kept  good,  the  broker  may,  on 
demand  and  notice,  close  the  transaction  by  buying  to 
cover  the  sale.7  He  must  show  that  there  was  occasion 
to  call  for  further  margin,  and  that  the  customer  failed 


v.  Rau,  95  N.  Y.  359. 
2Evans  v.  Wrenn,  93  App.  Div.  346. 
Gheen  v.  Johnson,  90  Pa.  St.  38. 
'Richter  v.  Poe  (Md.),  71  Atl.  420. 
'White  v.  Smith,  54  N.  ¥.522. 
"Barber  v.  Ellingwood,  144  App.  Div.  512. 
•Campbell  v.  Wright,  8  N.  Y.  St.  Rep.  471. 
'White  v.  Smith,  54  N.  Y.  522. 
Sterling  v.  Jaudon,  48  Barb.  459. 

103 


STOCK  EXCHANGE  LAWS 

to  furnish  it  after  receiving  reasonable  notice  prior  to  the 
purchase. 1 

In  closing  out  a  short  sale  account  the  broker  is  not 
required  to  give  notice  to  the  customer  of  the  time  and 
place  at  which  he  proposes  to  purchase.  Such  a  notice 
is  only  required  where  stocks  are  pledged  for  the  pay- 
ment of  a  debt.2  But  if  the  broker  elects  to  close  the 
transaction  for  reasons  other  than  a  shortage  of  security 
he  must  give  the  customer  reasonable  notice.3 

Where  a  broker  has  "sold  short"  for  a  customer  he 
may,  in  a  rapidly  rising  market,  and  after  the  customer 
has  refused  to  put  up  more  margin,  buy  in  the  stock  and 
charge  the  loss  to  the  customer's  account.  He  is  not 
obliged  to  take  into  consideration  rumors  communicated 
by  the  customer  that  the  stock  may  be  bought  lower 
next  day;  nor  to  hunt  him  up  and  repeat  to  him  every 
rumor  or  piece  of  information  before  protecting  himself.4 

Cooperating  with  Insolvent  Broker. 
A  broker  who  knows  that  another  broker  is  insolvent 
and  imposing  on  his  customers,  and  who  continues  to 
cooperate  with  him  and  assist  him  to  buy  stock  on  mar- 
gin, secured  by  stocks  known  to  belong  to  the  insolvent 
broker's  customers,  is  liable  equally  with  the  insolvent 
broker  to  his  customers  for  his  acts.5 


'Lazare  v.  Allen,  20  App.  Div.  616. 
See  Boyle  v.  Henning,  121  Fed.  376. 
'Sterling  v.  Jaudon,  48  Barb.  459. 
'Barberv.  Ellingwood,  144  App.  Div.  512. 

'Armstrong  v.  Bickel,  217  Pa.  173  (where  Northern  Pac.  shares  rose 
from  $60  to  $600) . 
'Austin  v.  Hayden  (Mich.),  137  N.  W.  317. 

104 


THE  BROKER  AND  HIS  CUSTOMER 
Conversion  of  Stock. 

Every  unauthorized  taking  of  personal  property,  and 
all  intermeddling  with  it,  beyond  the  extent  of  the  au- 
thority conferred,  in  case  a  limited  authority  is  given, 
with  intent  so  to  apply  and  dispose  of  it  as  to  alter 
its  condition  or  interfere  with  the  owner's  dominion,  is  a 
conversion. l 

So,  where  stock  certificates  were  endorsed  and  de- 
livered to  a  broker's  clerk  for  transfer  to  the  transferee 
on  the  corporate  books,  and  he  dealt  with  the  stock  as 
his  own  through  a  speculative  account  with  the  brokers 
in  his  brother's  name,  resulting  in  the  transfer  of  the 
certificates  to  the  brokers,  it  was  held  that  the  brokers 
had  constructive  notice  of  the  clerk's  conversion  of  the 
certificate,  and  were  themselves  guilty  of  constructive 
conversion.2  A  transfer  of  stock  may  be  a  conversion, 
although  it  is  not  a  strict  sale,  the  effect  being  the  same.3 

Where  it  is  not  the  custom  of  brokers  to  sell  their 
customers'  stock,  purchased  on  margin,  without  notice, 
and  they  have  made  no  call  for  margins  and  given  no 
notice  of  intention  to  sell,  or  of  the  time  and  place  of 
sale,  the  sale  of  the  stock  by  the  broker  is  a  conversion,4 
in  the  absence  of  an  agreement  dispensing  with  such 
notice,  or  a  provision  that  otherwise  disposes  of  the 
pledged  property.5 


'Kilmer  v.  Hutton,  131  App.  Div.  625 

2Kilmer  v.  Hutton,  131  App.  Div.  625 

'Reichland  v.  Hutton,  148  App.  Div.  813. 

•Gillett  v.  Whiting,  120  N.Y.  402;  rev'g  55  N.  Y.  Super.  Ct,  187. 

'Moore  v,  R.odew^d,  142  App.  Div.  741,  749. 

105 


STOCK  EXCHANGE  LAWS 

An  unauthorized  sale  by  the  broker  while  he  holds 
sufficient  margin  has  been  held  a  conversion,  whether  he 
has  given  notice  of  the  sale  to  the  customer  or  not. l 

An  unauthorized  sale  of  pledgedstockataplacenotpub- 
lic,  which  is  not  ratified  by  the  pledgor,  is  a  conversion.2 

A  mere  allegation  in  an  action  that  brokers  sold  or 
converted  to  their  own  use  certain  securities  which  they 
had  bought  on  margin  for  their  customer  is  too  vague 
and  indefinite.3 

Collateral  stock  was  transferred  on  the  books  to  the 
names  of  the  broker's  employee,  who  knew  the  facts. 
There  was  no  conversion  until  a  tender  of  the  amount  of 
the  debt  had  been  made  and  a  demand  for  the  collateral 
made  and  refused.4 

A  claim  for  conversion  of  a  certificate  of  stock  is 
predicated  on  a  wrongful  assumption  of  ownership  or 
interference  with  the  owner's  right  to  possession,  and  a 
tender  by  a  pledgor  of  the  amount  due,  and  a  demand  of 
the  return  of  the  pledge,  made  when  the  pledgor  knows 
that  the.  law  renders  it  impossible  for  the  pledgee  to 
accept  the  tender  or  comply  with  the  demand  do  not 
show  a  conversion.5 

When  Hypothecation  Is  Larceny. 

The  hypothecation  by  brokers  for  their  own  obligations 
of  stock  entrusted  to  them  for  safekeeping  is  larceny.6 

iTaylor  v.  Ketchum,  35  How.  Pr.  289;  5  Rob.  507. 
"Manning  v.  Heidelbach,  153  App.  Div.  790 
'Sprague  v.  Currie,  133  App.  Div.  18. 
'Jones  v.  Seaman,  133  App.  Div.  127. 
'Wood  v.  Fisk,  141  N.  Y.  Supp.  342. 
•Matter  of  Mills,  125  App.  Div.  730. 

1 06 


THE  BROKER  AND  HIS  CUSTOMER 

As  to  every  one  except  a  pledgee  from  the  broker,  who 
has  actually  in  good  faith  advanced  money  upon  the 
apparent  title  conferred  by  the  owner  of  the  securities 
upon  the  broker  as  his  bailee  or  agent,  the  owner  is 
entitled  to  stock  deposited  with  a  broker  for  safe- 
keeping. * 

Measure  of  Damages  —  Sale  of  Stock. 

If  a  broker  unjustifiably  closes  out  a  short  sale  trans- 
action, the  customer  may  recover  the  profit  he  would 
have  made  had  the  broker  given  him  reasonable  notice 
of  his  intention,2  i.  e.,  the  difference  between  the  price 
at  which  the  short  stock  was  bought  in  and  the  lowest 
market  price  of  the  stock,  within  a  reasonable  time, 
not  from  the  date  of  the  sale,  but  from  the  time  the 
customer  learns  of  the  conversion  of  the  stock.3 

The  highest  market  prices,  varying  from  a  few  days  to 
within  two  months  of  the  conversion  have  been  held 
within  the  rule.4 

All  the  customer  is  entitled  to  is  a  reasonable  time 
necessary  to  enable  him  to  determine  upon  his  line  of 
action.  He  cannot  speculate  at  the  expense  of  his 
brokers.5 

Brokers  made  an  unauthorized  sale  of  a  customer's 
stocks  while  he  was  away  in  the  country.  The  "rea- 

»Matter  of  Mills,  125  App.  Div.  730. 
'Barber  v.  Ellingwood,  144  App.  Div.  512. 

'Barber  v.  Ellingwood,  No.  2,  137  App.  Div.  704,  144  App.  Div.  512. 
Burnham  v.  Lawson,  1 18  App.  Div.  389. 
But  see  Wolff  v.  Lockvvood,  70  App.  Div.  569. 
'Mullen  v.  Quinlan  &  Co.,  195  N.  Y.  109. 
Hurt".  Miller,  120  App.  Div.  833. 

107 


STOCK  EXCHANGE  LAWS 

sonable  time"  in  computing  damages  was  not  when  he 
threatened  them  with  criminal  proceedings,  while  still 
away,  on  receiving  notice  of  the  sale,  but  two  weeks 
later,  when  he  returned  and  spent  a  full  day  in  the 
city  and  wrote  them  threatening  proceedings. l 

Broker's  Insolvency  —  Stock  Goes  to  Customer. 

On  a  broker's  insolvency,  stock  which  he  has  been 
carrying  for  a  customer  goes  to  the  customer,  not  to  the 
broker's  assignee.2 

Rights  of  the  Defrauded  Customer  of  an  Insolvent  Broker. 

The  conflict  between  various  claimants  against  an 
insolvent  broker  arises  when  various  customers  have 
delivered  money  or  securities  to  the  broker  either  for 
or  upon  the  execution  of  orders  or  for  safekeeping  or 
otherwise.  Assuming  that  the  relation  of  customer  and 
broker  has  arisen,  the  broker  becoming  insolvent  throws 
upon  the  court  the  burden  of  deciding  how  the  moneys 
in  bank  or  elsewhere,  the  securities  in  actual  posses- 
sion of  the  broker  and  the  securities  hypothecated  with 
the  banks  or  bankers  shall  be  distributed.  Ordinarily 
all  creditors  of  the  bankrupt  broker  would  share  on  an 
equal  basis,  pro  rata,  in  the  latter's  estate,  but  circum- 
stances sometimes  give  one  customer  a  superior  claim 
or  equity  over  other  customers.  The  most  common 
instance  is  where  the  customer  has  given  the  broker  the 
money  in  full  to  purchase  outright  the  securities  ordered. 

iRosenbaum  v.  Stiebel,  122  N.  Y.  Supp.  131. 

'Willard  v.  White,  56  Hun,  581. 

Le  Marchant  v.  Moore,  79  Hun,  352. 

108 


THE  BROKER  AND  HIS  CUSTOMER 

If  the  securities  have  been  purchased  and  the  certifi- 
cate is  in  the  hands  of  the  broker  at  the  time  of  failure, 
the  customer  is  entitled  to  its  immediate  delivery  to 
him,  upon  its  being  properly  identified.  If  the  securities 
have  not  been  purchased,  and  it  can  be  shown  that  the 
funds  were  deposited  in  bank  and  there  remained  at 
the  time  of  failure,  the  customer  is  entitled  to  have  such 
fund  repaid  to  him;  that  is,  he  is  entitled  to  the  bank 
account  itself.1  The  same  is  true  where  the  customer 
has  given  securities  to  the  broker  and  the  latter  has 
appropriated  them  and  put  the  proceeds  of  the  unau- 
thorized sale  in  his  bank  account.  Following  a  leading 
English  case,2  if  the  broker  mingles  the  customer's  funds 
with  his  own,  the  court  will  presume  that  the  money 
he  withdraws  is  his  own  and  that  the  remaining  funds 
belong  to  his  customer.3  This  upon  the  familiar  doc- 
trine of  tracing  trust  funds. 

The  situation  here  prescribed  is  of  course  entirely 
independent  of  the  criminality  involved  in  the  broker's 
conduct  either  in  misappropriating  moneys  given  to 
him  by  his  customer  for  the  purchase  of  stock  or  in 
misappropriating  stock  delivered  to  him  for  a  specific 
purpose.  In  such  cases  he  is  guilty  of  embezzlement.4 
This  became  material  in  deciding  the  superiority  of 
equities  that  arises  when  the  broker  mingles  stock  and 
hypothecates  them  all  en  bloc,  some  rightfully  and 


»In  re  Mulligan,  116  Fed.  715. 

*In  re  Halletts  Estate,  L.  R.  13  Ch.  D.  696. 

'In  re  Mulligan,  116  Fed.  715. 

4People  v.  Meadows  199  N.  Y.  i. 

109 


STOCK  EXCHANGE  LAWS 

some  wrongfully,  when  it  is  held  that  the  customer  whose 
stock  is  wrongfully  hypothecated  has  the  superior  equity 
and  is  entitled  to  have  prior  payment  to  make  good  his 
losses,  providing  his  stock  or  its  proceeds  can  be  traced.1 
Briefly,  therefore,  it  is  necessary  first  to  trace  the 
property  of  the  customer,  either  money  or  securities. 
But  having  done  so,  another  difficulty  arises,  namely, 
other  customers  may  have  been  similarly  defrauded  and 
their  securities  or  money  similarly  misappropriated  or 
converted.  Those  whose  property  or  money  cannot  be 
traced  under  the  circumstances  remain  the  unfortunates, 
and  the  conflict  of  equities  lies  only  between  those  who 
have  been  successful  in  so  doing.  As  between  the  latter 
the  court  will  divide  the  claimants  into  two  classes, 
those  whose  money  has  been  misappropriated  or  "whose 
securities  have  been  wrongfully  hypothecated"  and 
"those  whose  securities  have  been  rightfully  pledged." 
"Superior  rights"  are  granted  the  first  class  of  claimants, 
and  the  securities  of  the  second  class,  whose  rights  are 
"clearly  inferior,"  can  secure  satisfaction  of  their  claims 
only  after  those  in  the  first  class  are  made  whole  so  far 
as  the  specific  securities  or  money  traced  will  allow.2 

'West  v.  McLaughlin,  162  Fed.  124. 

In  re  Ennis.  Ex  parte  Bramford,  187  Fed.  720. 

In  re  Brown,  Ex  parte  Horrocks.  185  Fed.  766. 

In  re  Brown,  Ex  parte  Bank  of  Princeton,  175  Fed.  769. 

sln  re  Ennis,  Ex  parte  Bramford,  187  Fed.  720,  722. 

In  re  Mclntyre,  Ex  parte  Pippey,  Ex  parte  Hudson,  181  Fed.  955. 

In  Matter  of  Mills,  125  App.  Div.  730,  claimants  were  denied  the 
right  to  participate  in  the  superior  class.  The  case  is  interesting  as 
illustrating  the  distinctions  indulged  in  determining  to  which  class  a 
claimant  belongs.  A  very  interesting  article  covering  numerous  phases 
of  this  branch  of  the  subject  will  be  found  in  the  Columbia  Law  Review 
for  May  1912. 

no 


THE  BROKER  AND  HIS  CUSTOMER 

Cornering  the  Market  Illegal. 

It  is  well  settled  that  it  is  illegal  to  attempt  to  corner 
the  market.  As  it  is  the  intention  to  force  the  parties 
who  may  sell  to  those  making  the  attempt  to  settle 
differences,  it  is  a  gambling  transaction,  and  the  con- 
tracts are  unenforceable.  Some  courts  hold  corners  to 
be  illegal  as  in  restraint  of  trade.1 

Guaranteeing  Stock. 

A  broker  does  not  guarantee  the  genuineness  of  the 
stock  purchased  for  a  customer.2  Nor  has  he  any  implied 
authority  to  warrant  stock  sold  for  his  customer.3 

Unauthorized  Sale  —  Right  to  Advances,  etc. 

Whether  an  action  is  for  conversion  of  securities  bought 
on  margin  or  on  the  contract,  the  broker  is  entitled  to 
counterclaim  for  advances,  interest,  and  commissions, 
if  these  have  not  been  covered  by  the  proceeds  of  the 
unauthorized  sale.4 

In  an  action  for  the  balance  of  the  customer's  account 
after  selling  his  stock,  the  brokers  must  show  a  sale  in 
good  faith  and  to  a  person  authorized  to  purchase.5 

Broker's  Lien. 

A  wife  allowed  her  husband  to  pledge  her  securities 
as  margin  on  his  own  stock  transactions.  Although  the 

lArnott  v.  Pittston  etc.  Coal  Co.,  68  N.  Y.  558. 

Livermore  v.  Bushnell,  5  Hun,  285. 

'Peckham  v.  Ketchum,  5  Bosw.  506. 

'Smith  v.  Tracy,  36  N.  Y.  79. 

'Barber  v.  Ellingwood,  No.  2,  137  App.  Div.  704. 

Mclntyre  v.  Whitney,  139  App.  Div.  557. 

'Camman  v.  Huntington,  89  App.  Div.  99. 

ill 


STOCK  EXCHANGE  LAWS 

brokers  knew  that  these  securities  belonged  to  the  wife, 
they  had  nevertheless  a  valid  lien  on  them,  and  could 
sell  them  to  satisfy  it,  after  notice  to  the  wife.1 

In  an  action  by  exchange  brokers  against  curb  brokers 
the  defense  was  that  the  owners  were  guilty  of  fraud  in 
inducing  the  sale.  It  was  held  that  the  defense  was 
available,  the  relationship  between  Stock  Exchange 
broker  and  customer  not  being  exempt  from  the  ordi- 
nary rules  of  principal  and  agent.2  But  if  the  broker 
was  not  a  party  to  his  principal's  fraud,  he  had  a  lien  on 
the  stock  to  the  amount  of  his  advances  thereon.3 

An  Account  Stated. 

An  account  stated  requires  the  acts  of  two  parties,  the 
debtor  and  the  creditor.  Stockbrokers  cannot  recover 
upon  an  account  stated  where  it  is  shown  that  the  cus- 
tomer repudiated  the  account  rendered.4 

When  a  customer  retained  an  account  rendered  to  him 
by  his  brokers'  assignee  for  more  than  a  month  without 
objection,  it  was  a  question  for  the  jury  whether  he 
assented  to  it  so  as  to  make  it  an  account  stated.5 

Broker's  Clerk  as  Customer's  Agent. 

The  clerk  of  a  broker  may  be  constituted  the  agent  of 
a  customer  to  receive  from  the  broker  the  return  of 


'Moore  v.  Rodewald,  142  App.  Div.  741. 

JLeo  v.  McCormack,  186  N.  Y.  330. 

'id. 

4Schultheis  v.  Caughey,  146  App.  Div.  102. 

'Little  v.  McClain,  134  App.  Div.  197. 

112 


THE  BROKER  AND  HIS  CUSTOMER 

stock   certificates  given  as  security  for  a  margin  ac- 
count, or  their  equivalent.1 

Stock  Certificate  Not  a  Negotiable  Instrument. 

A  certificate  of  stock  is  not  a  negotiable  instrument. 
An  assignment  of  a  certificate  of  stock  with  a  P/A  en- 
dorsed on  the  certificate,  although  in  blank,  except  as  to 
signatures  and  witness,  presents  such  indicia  of  title 
that  an  innocent  holder  obtains  a  good  title.2 

Undisclosed  Principal. 

A  broker  who  sells  stock  though  acting  for  another 
without  disclosing  his  principal  is  himself  liable  as  prin- 
cipal.3 A  broker  selling  worthless  bonds  in  this  way 
is  personally  liable  to  the  purchaser.4 

Joint  Account. 

When  two  parties  open  a  joint  account  the  broker  is 
not  obliged  at  the  request  of  one  of  them  to  cancel  the 
joint  account  and  accept  in  lieu  thereof  the  separate 
liability  of  each  for  one-half  of  the  joint  liability.5 

Demand  for  Money  Deposited. 

A  customer  must  make  a  demand  for  money  deposited 
with  his  broker  before  bringing  an  action.6 

lCarlisle  v.  Norris,  142  N.  Y.  Supp.  393. 
'Talcott  v.  Standard  Oil  Co.,  149  App.  Div.  694. 
'Baasett  v.  Perkins,  65  Misc.  103. 
4Pugh  v.  Moore,  44  La.  Ann.  209. 
'Levy  v.  Potter,  104  App.  Div.  457. 
"Ennis  v.  Ross,  37  Misc.  160. 

"3 


PART  IV 

CONSTITUTION,   BY-LAWS    AND   RULES   OF   THE 
NEW  YORK  STOCK  EXCHANGE 


PART  IV 

Constitution,   By-laws  and  Rules   of  the  New  York 
Stock  Exchange 

Constitution  —  Rules  for  the  Government  of  the  Ex- 
change as  amended  to  January  1,  1914 

ARTICLE  I. 

Title  —  Objects. 

The  title  of  this  Association  shall  be  the  "NEW 
YORK  STOCK  EXCHANGE." 

Its  object  shall  be  to  furnish  exchange  rooms  and 
other  facilities  for  the  convenient  transaction  of  their 
business  by  its  members,  as  brokers;  to  maintain  high 
standards  of  commercial  honor  and  integrity  among  its 
members;  and  to  promote  and  inculcate  just  and  equi- 
table principles  of  trade  and  business. 

ARTICLE  II. 

Government. 

The  government  of  the  Exchange  shall  be  vested  in 
a  Governing  Committee,  composed  of  the  President  and 
the  Treasurer  of  the  Exchange,  and  of  forty  Members, 
elected  in  the  manner  hereinafter  provided.  The  mem- 

117 


STOCK  EXCHANGE  LAWS 

bers  of  the  Governing  Committee,  and  the  Secretary, 
shall  be  the  officers  of  the  Exchange. 

ARTICLE  III. 

Governing   Committee. 

SEC.  i.  The  Members  of  the  Governing  Committee 
shall  be  divided  into  four  classes,  each  class  consisting 
of  ten  members,  as  follows:  first  class,  to  hold  office  for 
one  year;  second  class,  for  two  years;  third  class  for 
three  years;  fourth  class,  for  four  years. 

SEC.  2.  The  Governing  Committee  shall  deter- 
mine the  manner  and  form  by  which  its  proceedings 
shall  be  conducted;  appoint  and  dissolve  all  Stand- 
ing or  other  Committees,  define,  alter  and  regulate 
their  jurisdiction  as  stated  in  this  instrument;  have 
original  and  supervisory  jurisdiction  over  any  and  all 
subjects  and  matters  referred  to  said  Committees; 
it  may  direct  and  control  their  actions  or  proceedings 
at  any  stage  thereof,  and  shall  try  all  charges  against 
members  of  the  Exchange  and  punish  such  as  may  be 
found  guilty.  It  shall  have  entire  control  of  the 
finances  of  the  Exchange  and  fix  the  amount  of  fees 
and  compensation  to  be  paid  to  members  of  Commit- 
tees, to  Officers  of  the  Exchange  and  to  appointees  of 
the  Governing  Committee.  It  may  require  of  all  officers 
or  appointees  of  the  Exchange  a  good  and  sufficient 
bond  to  secure  the  faithful  performance  of  their  duties. 
The  Governing  Committee  shall  be  vested  with  all 
other  powers  necessary  for  the  government  of  the  Ex- 

118 


CONSTITUTION,  BY-LAWS  AND  RULES 

change,  the  regulation  of  the  business  conduct  of  its 
members,  and  the  promotion  of  its  welfare,  objects  and 
purposes. 

SEC.  3.  A  Member,  who  shall  be  absent  from  three 
consecutive  regular  meetings  of  the  Governing  Com- 
mittee, without  having  been  excused  by  the  President, 
may  be  declared  by  a  two-thirds  vote  of  the  existing 
members  of  the  Committee  to  be  no  longer  a  Member. 

SEC.  4.  All  vacancies  occurring  in  the  Govern- 
ing Committee  shall  be  filled  by  said  Committee  until 
the  ensuing  annual  election. 

SEC.  5.  No  member  of  the  Governing  Committee 
shall  be  disqualified  from  participating  in  any  meeting, 
action  or  proceeding  of  any  kind  whatever  of  said  Com- 
mittee, by  reason  of  being  or  having  been  a  member  of  a 
Standing  Committee  or  Special  Committee  which  has 
made  prior  inquiry,  examination  or  investigation  of  the 
subject  under  consideration.  Nor  shall  any  member 
of  any  Standing  or  Special  Committee  be  disqualified, 
by  reason  of  such  membership,  from  acting  as  a  member 
of  the  Governing  Committee  upon  any  appeal  from  any 
decision  of  such  Standing  or  Special  Committee.  But 
no  member  shall  participate  in  the  adjudication  of 
any  case  in  which  he  is  personally  interested. 

SEC.  6.  A  majority  of  all  the  existing  members  of 
the  Governing  Committee  shall  be  necessary  to  con- 
stitute a  quorum. 

SEC.  7.  Any  hearing  or  trial  may  be  adjourned, 
from  time  to  time,  by  the  Governing  Committee  in 
its  discretion;  but  no  member  thereof,  who  shall  not 

119 


STOCK  EXCHANGE  LAWS 

have  been  present  at  every  meeting  of  said  Committee 
at  which  evidence  is  taken,  or  at  which  an  accused 
member,  or  a  member  whose  conduct  is  involved  in  the 
hearing,  is  heard,  shall  participate  in  the  final  decision. 

SEC.  8.  In  the  absence  of  both  the  President  and 
Vice-President,  any  ten  members  of  the  Governing  Com- 
mittee may  call  a  meeting  thereof  by  written  announce- 
ment from  the  rostrum. 

SEC.  9.  In  the  case  of  the  temporary  absence,  or  in- 
ability to  act,  of  both  the  President  and  Vice-President, 
the  Governing  Committee  may  choose  an  Acting  Presi- 
dent of  the  Exchange  pro  tern. 

SEC.  10.  The  Governing  Committee  shall  at  its 
first  regular  meeting  in  June  of  each  year,  designate 
counsel  for  the  Exchange;  such  counsel  to  be  employed 
at  the  pleasure  of  said  Committee. 

ARTICLE  IV. 

President. 

SEC.  i.  The  executive  power  of  the  Exchange  shall 
be  vested  in  the  President,  who  shall  direct  the  enforce- 
ment of  the  rules  and  regulations  and  have  the  care  of 
all  its  interests.  He  may  preside  over  the  Exchange 
whenever  he  shall  so  elect,  and  shall  be  the  presiding 
officer  of  the  Governing  Committee. 

SEC.  2.  The  President  may  call  special  meetings  of 
the  Exchange,  and  of  the  Governing  Committee.  He 
shall  call  special  meetings  of  the  Exchange,  upon  the 
written  request  of  one  hundred  members,  and  speciaJ 

120 


CONSTITUTION,  BY-LAWS  AND  RULES 

meetings  of  the  Governing  Committee,  upon  the  written 
request  of  ten  members  of  said  Committee. 

SEC.  3.  Should  special  exigencies  require,  the  Pres- 
ident may  appoint  committees  ad  interim,  to  act  until 
the  regular  appointments  are  made. 

ARTICLE  V. 

Vice-President. 

SEC.  i.  The  Governing  Committee,  at  its  first 
meeting  after  every  annual  election,  shall  choose  from  its 
Members  a  Vice-President  of  the  Exchange. 

SEC.  2.  The  Vice-President  shall,  in  the  absence  of 
the  President,  assume  all  the  functions  and  powers,  and 
discharge  all  the  duties  of  the  President. 

ARTICLE  VI. 

Treasurer. 

SEC.  i.  It  shall  be  the  duty  of  the  Treasurer  to 
receive  and,  acting  under  instructions  from  the  Finance 
Committee,  to  take  charge  of  and  disburse  moneys  of  the 
Exchange.  He  shall  present  to  the  Governing  Committee 
at  its  first  regular  meeting  in  May  of  each  year  a  report 
of  the  finances  of  the  Exchange  for  the  twelve  months 
ending  April  30  preceding.  He  shall  be  a  member  of 
the  Finance  Committee,  and  a  Trustee  of  the  Gratuity 
Fund. 

SEC.  2.  In  the  event  of  failure,  neglect  or  inability 
of  the  Treasurer,  for  any  reason,  to  execute  the  duties  of 
his  office  the  Finance  Committee  shall  appoint  one  of 

121 


STOCK  EXCHANGE  LAWS 

its  members,  who,  together  with  either  the  President  or 
Vice-President,  shall  act  as  Treasurer  pro  tern. 

ARTICLE  VII. 

Secretary. 

SEC.  i.  The  Secretary  shall  be  appointed  by  a  maj- 
ority vote  of  the  Governing  Committee  and  shall  hold  his 
position  subject  to  the  pleasure  of  the  Governing  Com- 
mittee. It  shall  be  the  duty  of  the  Secretary  to  record 
in  a  book  of  minutes  the  proceedings  of  the  Exchange 
and  take  charge  of  the  books  and  papers  of  the  associa- 
tion. He  shall  be  the  Secretary  of  the  Governing 
Committee  and  of  the  Standing  Committees.  He  shall 
conduct  the  correspondence  of  the  Exchange  and  shall 
keep  a  ledger  containing  the  names  of  all  the  members, 
with  dates  of  their  admission  and  transfer  of  membership. 
He  shall  be  the  accountant  of  the  Exchange,  and  shall 
perform  such  other  duties  as  the  Governing  Committee 
may  direct. 

ARTICLE  VIII. 

Chairman  and  Assistant  Chairman. 

SEC.  i.  The  Governing  Committee  may  appoint  a 
Chairman,  who  shall  hold  his  position  subject  to  the 
pleasure  of  said  Committee.  It  shall  be  his  duty  to 
preside  over  the  Exchange  during  business  hours,  main- 
tain order,  enforce  the  rules,  impose  fines,  and  perform 
such  other  duties  as  the  Committee  of  Arrangements  may 
direct, 

122 


CONSTITUTION,  BY-LAWS  AND  RULES 

SEC.  2.  The  Chairman  shall  not  be  permitted  per- 
sonally to  buy  or  sell  securities  upon  the  floor  of  the 
Exchange. 

SEC.  3 .  The  Committee  of  Arrangements  may  appoint 
an  Assistant  Chairman,  who  shall  hold  his  position  sub- 
ject to  the  pleasure  of  said  Committee,  and  perform 
such  duties  as  said  Committee  may  direct. 

ARTICLE  IX 

Elections. 

SEC.  i.  The  annual  election  of  the  Exchange  shall 
be  held  on  the  second  Monday  of  May;  at  which  time 
there  shall  be  elected  by  ballot  a  President,  and  a  Trea- 
surer, each  for  the  term  of  one  year;  a  Trustee  of  the 
Gratuity  Fund  for  the  term  of  five  years ;  and  ten  Mem- 
bers of  the  Governing  Committee  for  the  term  of  four 
years ;  also  members  to  fill  any  vacancies  which  may  have 
occurred  during  the  preceding  year  either  in  the  Trustees 
of  the  Gratuity  Fund  or  in  the  Governing  Committee. 

In  each  case  the  member  receiving  the  highest  number 
of  votes  for  any  office  or  position  shall  be  declared  elected 
thereto. 

SEC.  2.  An  annual  election  of  the  Exchange  shall 
also  be  held  on  the  second  Monday  in  January,  at  which 
time  there  shall  be  elected  by  ballot  a  Nominating  Com- 
mittee to  consist  of  five  members  (not  officers  of  the 
Exchange)  who  shall  serve  for  a  period  of  one  year. 
Any  vacancy  during  said  term  shall  be  filled  by  the 
remaining  members.  The  Nominating  Committee  shall 

123 


STOCK  EXCHANGE  LAWS 

hold  at  least  three  meetings  in  the  month  of  March,  due 
notice  of  which  shall  be  posted  on  the  bulletin  board,  and 
sent  to  each  member  of  the  Exchange,  inviting  members 
of  the  Exchange  to  attend  said  meetings  for  the  pur- 
pose of  suggesting  nominees  for  the  offices  and  positions 
which  are  to  be  filled  at  the  annual  election  on  the  second 
Monday  in  May  following.  Said  Committee  shall 
report  to  the  Exchange  on  the  second  Monday  in  April, 
nominees  for  such  offices  and  positions. 

The  Nominating  Committee  shall  also  hold  at  least 
three  meetings  in  the  month  of  November,  due  notice 
of  which  shall  be  posted  on  the  bulletin  board,  and  sent 
to  each  member  of  the  Exchange,  inviting  members  of 
the  Exchange  to  attend  said  meetings  for  the  purpose 
of  suggesting  nominees  for  the  Nominating  Committee 
for  the  ensuing  year.  Said  Committee  shall  report  to 
the  Secretary  of  the  Exchange  at  or  before  two  o'clock 
p.  M.  on  the  third  Monday  in  December,  nominations 
for  a  Nominating  Committee  to  be  balloted  for  at  said 
annual  election  on  the  second  Monday  in  January 
following. 

In  addition  to  the  above  method,  members  of  the 
Exchange  at  large  may  propose  nominees  for  members 
of  the  Nominating  Committee  by  petition;  a  nominee 
thus  nominated  must  be  endorsed  by  not  less  than  forty 
members  of  the  Exchange  and  no  member  shall  endorse 
more  than  one  nominee.  Such  petitions  shall  be  filed 
with  the  Secretary  of  the  Exchange  in  sealed  envelopes 
at  or  before  two  o'clock  p.  M.  on  the  third  Monday  in 
December.  The  Nominating  Committee  and  the  Secre- 

124 


CONSTITUTION,  BY-LAWS  AND  RULES 

tary  of  the  Exchange  shall  open  said  envelopes  on  said 
day  and  the  names  of  the  nominees  therein  proposed  shall 
be  arranged  alphabetically  with  those  of  the  five  nominees 
of  the  Nominating  Committee  and  reported  to  the 
Exchange  on  the  following  day.  The  five  nominees 
in  this  combined  list  receiving  the  highest  number  of 
votes  at  the  annual  election  on  the  second  Monday  in 
January,  shall  constitute  the  Nominating  Committee  for 
the  ensuing  year.  In  case  of  a  tie  the  names  of  the 
members  involved  shall  be  referred  to  the  retiring 
Nominating  Committee  who  shall  make  selection  by  lot. 

SEC.  3.  Any  member  of  the  Exchange,  in  good 
standing,  shall  be  entitled  to  vote  at  any  election  or 
meeting  of  the  Exchange. 

SEC.  4.  When  the  Exchange  shall  be  assembled  for 
the  transaction  of  business  other  than  dealing  in  securi- 
ties, a  majority  of  all  the  members  shall  constitute  a 
quorum. 

ARTICLE  X. 

Eligibility  —  Vacancy  in  Office. 

SEC.  i.  No  person  shall  be  eligible  to  the  office  of 
President,  Treasurer,  Trustee  of  the  Gratuity  Fund,  or 
Member  of  the  Governing  Committee,  who  shall  not  be, 
at  the  time  of  his  election,  a  member  in  good  standing. 

SEC.  2.  The  expulsion,  suspension  or  transfer  of 
membership  of  a  member  holding  any  office  or  position, 
to  which  he  has  been  either  elected  or  appointed,  shall 
create  a  vacancy  therein  which  shall  be  filled  as  provided 
in  these  rules. 


STOCK  EXCHANGE  LAWS 

SEC.  3.  In  the  event  of  the  refusal,  failure,  neglect 
or  inability  of  an  officer  of  the  Exchange  to  discharge 
the  duties  of  his  office,  or  for  any  good  cause,  of  the 
sufficiency  of  which  the  Governing  Committee  shall  be 
the  sole  judge,  said  Committee  shall  have  power,  by 
a  two-thirds  vote  of  all  its  existing  members,  to  remove 
said  officer  and  declare  the  position  held  by  him  to  be 
vacant. 

SEC.  4.  In  case  a  vacancy  shall  occur  in  the  office 
either  of  President  or  Treasurer,  a  new  election  by 
ballot  shall  be  held  forthwith  to  fill  such  vacancy  for 
the  unexpired  term. 

SEC.  5.  In  case  of  vacancy  in  the  office  of  Vice- 
President,  the  same  shall  be  filled  by  the  Governing 
Committee  at  its  next  meeting  after  the  vacancy  occurs. 

SEC.  6.  Every  appointee,  clerk  or  employee  of  the 
Exchange  shall  hold  his  office,  place  or  position  only 
during  the  pleasure  of  the  authority  by  which  he  was 
appointed;  and  he  may  be,  at  any  time,  removed,  dis- 
missed or  discharged  by  a  majority  vote  of  the  Com- 
mittee by  which  he  was  appointed,  or  by  a  like  vote  of 
the  Governing  Committee. 

ARTICLE  XI. 

Standing  Committees. 

SEC.  i.  Promptly  after  each  annual  election  the 
Governing  Committee  shall  appoint  from  its  Members 
the  following  Standing  Committees: 

First.  —  A  Committee  of  Arrangements,  to  consist 

126 


CONSTITUTION,  BY-LAWS  AND  RULES 

of  seven  members.  It  shall  have  the  general  care  and 
supervision  of  the  Exchange,  enforce  all  rules  and  regu- 
lations necessary  to  the  conduct  of  business,  to  good 
order  and  the  comfort  of  the  members,  and  consider 
all  complaints  of  violation  of  said  rules.  It  shall  con- 
trol and  regulate  the  quotation  service  and  all  telegraph 
or  telephone  connection  with  the  Exchange.  It  shall, 
except  as  herein  otherwise  expressly  provided,  appoint, 
dismiss  and  determine  the  number,  duty  and  pay  of  all 
employees,  and  provide  all  supplies  for  the  Exchange 
and  make  all  necessary  repairs  to  its  building. 

Second.  —  A  Committee  on  Admissions,  to  consist 
of  fifteen  members.  All  applications  for  membership, 
and  all  applications  of  suspended  members  for  rein- 
statement to  their  privileges,  shall  be  referred  to  this 
Committee. 

The  affirmative  vote  of  two-thirds  of  the  entire  Com- 
mittee shall  be  necessary  to  elect  to  membership,  or  to 
reinstate  a  suspended  member. 

No  application  for  readmission  of  a  person  who  has 
ceased  to  be  a  member  of  the  Exchange  through  viola- 
tion of  its  Constitution,  or  for  the  reinstatement  of  a 
member  who  has  been  suspended  under  Sec.  2,  Article 
XVI,  shall  be  considered  by  this  Committee,  unless 
said  person  has  obtained  the  consent  of  two-thirds  of  the 
members  of  the  Governing  Committee  present,  when 
such  application  is  considered. 

Third.  —  An  Arbitration  Committee  to  consist  of 
nine  members.  It  shall  investigate  and  decide,  when 
properly  brought  before  it,  all  claims  and  matters  of 

127 


STOCK  EXCHANGE  LAWS 

difference  arising  from  contracts  subject  to  the  rules  of 
the  Exchange,  between  members  of  the  Exchange,  or 
at  the  instance  of  a  non-member  between  members  and 
non-members.  The  Committee  may  dismiss  any  case 
and  refer  the  parties  to  their  remedies  at  law,  and  it 
shall  so  refer  them  upon  the  joint  request  of  the  con- 
testants. The  decision  of  this  Committee  shall  be  final 
in  all  cases,  unless  an  appeal  be  taken  by  a  member  of 
the  Committee  as  in  these  rules  provided,  or  in  cases 
involving  a  sum  of  $2,500  or  over,  when  either  party 
may  appeal  within  ten  days  to  the  Governing  Commit- 
tee; said  appeal  shall  be  submitted  to  the  Governing 
Committee  by  the  Secretary  of  the  Exchange  upon  a 
printed  transcript  of  the  records  of  the  .case,  together 
with  such  printed  arguments  as  the  parties  to  the  appeal 
may  desire  to  make;  upon  such  appeal,  the  Governing 
Committee  may  finally  adjudicate  the  case,  relegate  the 
parties  to  their  remedies  at  law,  or  direct  a  rehearing  by 
the  Arbitration  Committee. 

A  non-member  making  a  claim  shall  execute  an  agree- 
ment to  abide  by  the  rules  of  the  Exchange,  and  also  a 
full  release  of  said  claim,  and  shall  deliver  them  to  the 
Chairman  of  the  Arbitration  Committee,  who  shall  keep 
them  in  trust  to  abide  the  result  of  said  arbitration  and  de- 
liver them  to  the  defendant  in  any  of  the  following  cases: 

(a)  In  case  the  plaintiff  shall  fail  to  appear  before 
the  Arbitration  Committee  within  such  time  as  said 
Committee  shall  designate. 

(b)  In  case  judgment  shall  be   rendered  for  said 
defendant  by  the  Arbitration  Committee. 

128 


CONSTITUTION,  BY-LAWS  AND  RULES 

(c)  In  case  the  defendant  shall  pay,  or  offer  to  pay, 
to  the  claimant  the  amount  of  judgment  rendered  in 
his  favor,  and  shall  have  filed  with  the  Chairman  satis- 
factory evidence  of  such  payment  or  proffered  payment. 

In  case  judgment  shall  be  rendered  against  any  mem- 
ber of  the  Exchange,  which  he  neglects  to  pay,  or  if  the 
case  be  dismissed,  then  such  release  shall  be  canceled 
and  returned  to  the  plaintiff. 

Fourth.  —  A  Committee  on  Business  Conduct,  to  con- 
sist of  five  members. 

It  shall  be  the  duty  of  this  Committee  to  consider 
matters  relating  to  the  business  conduct  of  members 
with  respect  to  customers'  accounts. 

It  shall  also  be  the  duty  of  this  Committee  to  keep 
in  touch  with  the  course  of  prices  of  securities  listed  on 
the  Exchange,  with  the  view  of  determining  when  im- 
proper transactions  are  being  resorted  to. 

It  shall  have  power  to  examine  into  the  dealings  of 
any  members,  with  respect  to  the  above  subjects,  and 
report  its  finding  to  the  Governing  Committee. 

Fifth.  —  A  Committee  on  Clearing-House,  to  consist 
of  five  members.  It  shall  have  general  charge  of  the 
Clearing-House  of  the  Exchange  and  the  business  there- 
of, and  shall  from  time  to  time  designate  the  securities 
to  be  cleared.  It  may  determine  the  amount  of  salary 
or  compensation  to  be  paid  to  officers  and  employees 
of  the  Clearing-House  and  make  expenditures  from  its 
funds  for  the  conduct  of  its  business.  It  shall  make 
monthly  financial  reports  to  the  Finance  Committee. 

Sixth.  —  A  Committee  on  Commissions,  to  consist  of 

129 


STOCK  EXCHANGE  LAWS 

five  members.  It  shall  enforce  the  rules  relating  to 
commissions,  partnerships  and  branch  offices,  and 
shall  report  to  the  Governing  Committee  any  unde- 
sirable partnership  or  branch  office  or  any  violation  of 
said  rules. 

Seventh.  —  A  Committee  on  Constitution  to  consist  of 
five  members,  to  which  shall  be  referred  all  additions, 
alterations,  or  amendments  to  the  Constitution.  It  shall 
report  them  back  to  the  Governing  Committee,  but  only 
at  regular  meetings  or  at  special  meetings  called  solely 
for  the  purpose  of  considering  them. 

Eighth.  —  A  Finance  Committee  to  consist  of  seven 
members.  It  shall  meet  prior  to  the  first  regular  meet- 
ing of  the  Governing  Committee  in  each  month  and  ex- 
amine the  various  accounts  and  vouchers;  and,  acting 
as  a  Board  of  Audit,  the  Committee  shall  report  its  ex- 
amination to  the  Governing  Committee.  It  shall  also 
make  examinations  of  the  condition  of  the  Gratuity  Fund 
as  provided  in  Article  XIX  hereof. 

Ninth.  —  A  Committee  on  Insolvencies  to  consist  of 
three  members  selected  from  the  Committee  on  Ad- 
missions. It  shall  investigate  every  case  of  insolvency 
immediately  after  the  announcement  thereof  to  the 
Exchange.  It  shall  ascertain  the  cause  of  failure  and 
promptly  report  the  result  of  its  examination  to  the 
Committee  on  Admissions. 

Tenth.  — A  Law  Committee  to  consist  of  five  members, 
to  which  shall  be  referred  all  questions  of  law  affecting 
the  interests  of  the  Exchange. 

It  shall  act  in  an  advisory  capacity  to  the  President 

130 


CONSTITUTION,  BY-LAWS  AND  RULES 

when  requested,  shall  represent  the  Exchange  in  con- 
ferences with  other  interests,  and  is  authorized  and 
empowered,  whenever  the  Committee  shall  deem  it  to 
be  for  the  interest  of  the  Exchange,  to  examine  into  the 
dealings  of  any  member  of  the  Exchange. 

Eleventh.  —  A  Committee  on  Securities  to  consist  of 
five  members.  It  shall  make  rules  defining  the  require- 
ments for  regularity  in  delivery  of  securities  dealt  in 
at  the  Exchange;  and  decide  all  questions  relating  to 
the  settlement  of  contracts  subject  to  the  rules  of  the 
Exchange,  of  due  bills,  of  irregularities  in  securities,  or 
in  deliveries  thereof,  and  all  questions  relating  to  recla- 
mations therefor. 

Twelfth.  —  A  Committee  on  Stock-List  to  consist  of 
five  members.  It  shall  receive  and  consider  all  appli- 
cations for  placing  securities  upon  the  list  of  the  Ex- 
change, and  make  report  and  recommendation  thereon 
to  the  Governing  Committee,  giving  full  statement 
concerning  organization,  capitalization,  resources  and 
indebtedness. 

It  shall  have  power  to  place  upon  the  list,  without 
report  and  recommendation  to  the  Governing  Commit- 
tee, any  obligations  of  the  Government  of  the  United 
States  or  of  any  state  or  city  thereof,  or  of  a  foreign 
state  or  city,  also  temporary  receipts  issued  by  any 
corporation  or  firm  for  part  or  full  payment  of  subscrip- 
tion to  bonds,  stocks,  or  other  obligations;  and  it  shall 
have  power  to  direct  that  any  such  securities  or  tem- 
porary receipts  be  taken  from  the  list,  and  further 
dealings  therein  prohibited. 


STOCK  EXCHANGE  LAWS 

It  shall  have  charge  of  the  arrangement  and  revision 
of  the  list  of  securities. 

SEC.  2.  The  Standing  Committees  of  the  Exchange, 
and  all  Special  Committees,  shall  determine  the  manner 
and  form  by  which  their  proceedings  shall  be  conducted; 
shall  make  such  regulations  for  their  government  as 
they  shall  deem  proper,  and  may  fill  any  vacancies 
occurring  in  their  membership,  subject  always  to  the 
control  and  supervision  of  the  Governing  Committee. 

SEC.  3.  A  majority  of  the  members  of  any  Commit- 
tee shall  be  necessary  to  constitute  a  quorum. 

ARTICLE  XII. 

Appeals. 

SEC.  i.  An  appeal  to  the  Governing  Committee, 
from  any  decision  of  a  Standing  Committee  may  be 
taken  by  a  member  of  the  Exchange,  interested  therein, 
if  made  in  writing  to  the  President  within  two  days 
after  said  decision  has  been  rendered;  but  nothing 
herein  contained  shall  authorize  an  appeal  from  a  de- 
cision of  the  Committee  on  Admissions,  except  as  pro- 
vided in  Section  4,  Article  XVI  of  these  Rules,  nor  from 
a  decision  of  the  Arbitration  Committee,  except  as 
provided  in  the  third  sub-division  of  Section  i,  Article 
XI,  of  these  Rules. 

SEC.  2.  A  member  of  a  Standing  Committee,  present 
at  a  hearing  of  a  case,  may,  within  two  days  after  the  deci- 
sion has  been  made  thereon,  appeal  therefrom  to  the  Gov- 
erning Committee  by  writing,  addressed  to  the  President. 

132 


CONSTITUTION,  BY-LAWS  AND  RULES 

ARTICLE  XIII. 

Applications  for  Membership  —  Eligibility  —  Initiation 

Fee. 

SEC.  i.  Every  applicant  for  membership  must  be 
at  least  twenty-one  years  of  age,  and  a  citizen  of  the 
United  States. 

SEC.  2.  The  membership  of  the  Exchange  shall  not  be 
increased  except  by  action  of  the  Governing  Committee, 
which  shall  prescribe  the  number  of  increase  and  the 
terms  of  admission.  Such  action  shall  be  submitted 
to  the  Exchange  on  the  same  conditions  as  those  pre- 
scribed for  amendments  to  the  Constitution. 

SEC.  3.  Members  admitted  by  transfer  shall  pay 
to  the  Exchange  an  initiation  fee  of  Two  Thousand 
Dollars. 

SEC.  4.  If  the  initiation  fee  of  an  applicant  for  ad- 
mission to  membership  is  not  paid  on  the  day  of  his 
election  and  notification  by  the  Secretary,  such  election 
shall  be  void. 

SEC.  5.  No  person,  elected  to  membership,  shall  be 
admitted  to  the  privileges  thereof  until  he  shall  have 
signed  the  Constitution  of  the  Exchange.  By  such 
signature  he  pledges  himself  to  abide  by  the  same  and 
by  all  subsequent  amendments  thereto. 

ARTICLE  XIV. 

Dues  and  Fines  —  Penalty  for  Non-Payment. 
SEC.  i.     The  dues  of  all  members  of  the  Exchange 
shall  be  payable  on  May  ist  and  November  ist  of  each 
year,  and  shall  be  fifty  dollars  semi-annually,  exclusive 

133 


STOCK  EXCHANGE  LAWS 

of  fines,  and  of  assessments  under  Article  XVIII  of  the 
Constitution. 

SEC.  2.  Any  member  who  shall  neglect  to  pay  his 
fines,  dues  or  any  assessment  for  the  Gratuity  Fund 
for  three  months  after  they  become  payable,  shall  be 
reported  by  the  Treasurer  to  the  President,  who  shall, 
after  due  notice  to  the  delinquent,  suspend  said  delin- 
quent until  said  dues  are  paid. 

If  the  fines,  dues  or  assessments  of  any  suspended 
member  are  not  paid  at  the  end  of  one  year  after  they 
become  payable,  the  membership  of  said  suspended 
member  may  be  disposed  of  by  the  Committee  on  Ad- 
missions. 

ARTICLE  XV. 

Transfer  of  Membership. 

SEC.  i.  A  transfer  of  membership  may  be  made 
upon  submission  of  the  name  of  the  candidate  to  the 
Committee  on  Admissions,  and  the  approval  of  the  trans- 
fer by  two-thirds  of  the  entire  Committee.  Notice 
of  the  proposed  transfer  shall  be  posted  on  the  bulletin 
in  the  Exchange  for  at  least  ten  days  prior  to  transfer. 

SEC.  2.  All  contracts  subject  to  the  rules  of  the 
Exchange,  made  by  a  member  proposing  to  transfer 
his  membership,  shall  mature  on  the  tenth  day  of  the 
posting  of  notice  of  the  proposed  transfer;  and  said 
member  shall  not  be  permitted  thereafter  to  make 
any  contracts  subject  to  the  rules  of  the  Exchange,  pend- 
ing the  approval  of  the  proposed  transfer  by  the  Com- 
mittee on  Admissions. 

134 


CONSTITUTION,  BY-LAWS  AND  RULES 

This  rule  shall  also  apply  in  cases  where  a  member- 
ship is  disposed  of  by  the  Committee  on  Admissions. 

SEC.  3.  Upon  any  transfer  of  membership,  whether 
made  by  a  member  voluntarily,  or  by  the  Governing 
Committee  or  the  Committee  on  Admissions  in  pursu- 
ance of  the  provisions  of  the  Constitution,  the  proceeds 
thereof  shall  be  applied  to  the  following  purposes  and 
in  the  following  order  of  priority,  viz. : 

First.  —  The  payment  of  all  fines,  dues,  assessments 
and  charges  of  the  Exchange,  or  any  department  thereof, 
against  a  member  whose  membership  is  transferred. 

Second.  —  The  payment  of  creditors,  members  of 
the  Exchange,  or  firms  registered  thereon,  of  all  filed 
claims  arising  from  contracts  subject  to  the  rules  of  the 
Exchange,  if,  and  to  the  extent  that,  the  same  shall  be 
allowed  by  the  Committee  on  Admissions.  If  said 
proceeds  shall  be  insufficient  to  pay  said  claims,  as  so 
allowed,  in  full,  the  same  shall  be  applied  to  the  payment 
thereof  pro  rata. 

Third.  —  The  surplus,  if  any,  of  said  proceeds  shall 
be  paid  to  the  person  whose  membership  is  transferred, 
or  to  his  legal  representatives,  upon  the  execution  by 
him  or  them  of  a  release  or  releases  satisfactory  to  the 
Committee  on  Admissions. 

The  Committee  on  Admissions  shall  have  power,  by 
rule  or  otherwise,  to  secure  the  observance  of  the  pro- 
visions of  this  Article. 

SEC.  4.  All  unmatured  debts  or  other  obligations 
of  a  member,  arising  out  of  contracts  subject  to  the  rules 
of  the  Exchange,  shall  become  due  and  payable  imme- 


STOCK  EXCHANGE  LAWS 

diately  prior  to  the  transfer  of  his  membership;  and  all 
claims  filed  with  the  Committee  on  Admissions,  founded 
upon  contracts  subject  to  the  rules  of  the  Exchange, 
shall,  if,  and  to  the  extent  that  the  same  are  allowed  by 
said  Committee,  be  liquidated,  and  paid,  pro  rata,  out 
of  the  proceeds  of  said  membership  upon  consummation 
of  the  transfer. 

SEC.  5.  A  member  shall  forfeit  all  right  to  share  in 
the  proceeds  of  a  membership,  unless  he  file  a  statement 
of  his  claim  with  the  Committee  on  Admissions  prior 
to  the  transfer  of  such  membership;  but  such  claim,  as 
allowed  by  the  Committee  on  Admissions,  may  be  paid 
out  of  any  surplus  remaining  after  all  other  claims, 
allowed  by  said  Committee,  have  been  paid  in  full. 

SEC.  6.  Claims  growing  out  of  transactions  between 
partners,  who  are  members  of  the  Exchange,  shall  not 
share  in  the  proceeds  of  the  membership  of  one  of  such 
partners,  until  after  all  other  claims,  as  allowed  by  the 
Committee  on  Admissions,  have  been  paid  in  full. 

SEC.  7.  When  a  member  dies,  his  membership  may 
be  disposed  of  by  the  Committee  on  Admissions. 

SEC.  8.  When  a  member  is  expelled,  or  becomes  in- 
eligible for  reinstatement,  his  membership  may  be  dis- 
posed of  forthwith  by  the  Committee  on  Admissions. 

SEC.  9.  The  expulsion  or  suspension  of  a  member 
shall  not  affect  the  rights  of  creditors,  members  of  the 
Exchange  or  of  firms  registered  thereon. 

SEC.  10.  When  a  member  is  in  debt  to  another 
member,  the  death  of  the  creditor  member  or  the  trans- 
fer of  his  membership,  either  by  himself  voluntarily,  or 

136 


CONSTITUTION,  BY-LAWS  AND  RULES 

by  the  Governing  Committee,  or  the  Committee  on 
Admissions,  shall  not  affect  the  rights  of  said  creditor 
member,  his  firm,  or  estate,  to  share  in  the  proceeds  of 
the  membership  of  the  debtor  member  under  this  Article, 
in  the  same  manner  and  to  the  same  extent  as  if  such 
creditor  member  had  not  died  or  his  membership  had 
not  been  transferred. 

ARTICLE  XVI. 

Insolvent  Members  —  Suspension  —  Reinstatement. 

SEC.  i.  A  member  who  fails  to  comply  with  his 
contracts,  or  is  insolvent,  or  who  is  a  partner  in  a  firm, 
registered  upon  the  Exchange,  which  fails  to  comply 
with  its  contracts,  or  is  insolvent,  shall  immediately 
inform  the  President,  in  writing,  that  he  or  his  firm,  is 
unable  to  meet  their  engagements,  and  prompt  notice 
thereof  shall  be  given  to  the  Exchange.  He  shall  thereby 
become  suspended  from  membership  until,  after  having 
settled  with  his  creditors,  or  the  creditors  of  his  firm, 
he  has  been  reinstated  by  the  Committee  on  Admissions. 

SEC.  2.  Whenever  the  President  shall  ascertain  that 
a  member  has  failed  to  meet  his  engagements,  or  is  in- 
solvent, or  that  a  firm  registered  upon  the  Exchange 
has  failed  to  meet  its  engagements,  or  is  insolvent,  and 
that  such  member,  or  such  firm,  has  neglected  to  com- 
ply with  the  requirements  of  the  preceding  section,  he 
shall  announce  to  the  Exchange  the  insolvency  and  sus- 
pension of  such  member  or  such  firm. 

SEC.  3.  If  a  member,  suspended  under  this  Article, 

137 


STOCK  EXCHANGE  LAWS 

fails  to  settle  with  his  creditors  and  apply  for  rein- 
statement, within  one  year  from  the  time  of  his  sus- 
pension, his  membership  shall  be  disposed  of  by  the 
Committee  on  Admissions. 

The  Governing  Committee  may,  by  a  two-thirds  vote 
of  the  members  present,  extend  the  time  of  settlement 
for  periods  not  exceeding  one  year  each.  At  the  ex- 
piration of  the  time  granted,  the  membership  of  said 
suspended  member  shall  be  disposed  of  as  above  pro- 
vided. 

SEC.  4.  When  a  suspended  member  applies  for  re- 
instatement he  shall  furnish  to  the  Chairman  of  the 
Committee  on  Admissions  a  list  of  his  creditors,  a  state- 
ment of  the  amounts  originally  owing,  and  the  nature 
of  the  settlement  in  each  case.  Notice  of  the  proposed 
consideration  of  the  application  shall  be  given  through 
the  Chairman  of  the  Exchange  on  three  consecutive 
days,  and  said  notice  shall  also  be  posted  upon  the 
bulletin.  Upon  the  applicant  presenting  satisfactory 
proof  of  settlement  with  all  his  creditors,  the  Committee 
shall  proceed  to  ballot  for  him  in  accordance  with  its 
rules  and  regulations.  Failing  to  receive  the  approving 
vote  of  two-thirds  of  the  entire  Committee,  the  appli- 
cant shall  be  entitled  to  be  balloted  for  at  any  five 
subsequent  regular  meetings  of  the  Committee,  to  be 
designated  by  himself:  provided,  however,  that  the  six 
ballotings  to  which  the  applicant  shall  be  entitled  shall 
be  within  one  year  from  the  date  of  his  suspension,  or 
within  such  further  extended  time  for  settlement  as 
may  have  been  granted  by  the  Governing  Committee. 

138 


CONSTITUTION,  BY-LAWS  AND  RULES 

If  on  the  sixth  ballot  the  applicant  be  rejected,  he 
may  appeal  within  ten  days  thereafter  to  the  Governing 
Committee,  who  may  by  an  affirmative  vote  of  not  less 
than  twenty-five  of  its  members  reinstate  the  applicant. 

If  he  fails  to  make  application  to  the  Committee  on 
Admissions,  to  be  balloted  for  as  above  provided,  or  if 
rejected  by  the  Governing  Committee,  his  membership 
shall  be  disposed  of  by  the  Committee  on  Admissions. 

SEC.  5.  Whenever  the  Governing  Committee  shall 
determine,  upon  the  report  of  the  Committee  on  Ad- 
missions, that  the  failure  of  a  member  or  of  a  firm  reg- 
istered upon  the  Exchange  has  been  caused  by  reck- 
less or  unbusinesslike  dealing,  said  member,  or  the  part- 
ner or  partners  in  such  firm  who  are  members  of  the 
Exchange,  may,  by  a  two-thirds  vote  of  the  existing 
members  of  the  Governing  Committee,  be  declared  in- 
eligible for  reinstatement. 

SEC.  6.  Every  suspended  member  shall  file  with  the 
secretary  of  the  Exchange,  within  thirty  days  after  his 
suspension,  a  written  statement  containing  a  complete 
list  of  his  creditors  and  of  the  amount  owing  to  each. 

ARTICLE  XVH. 

Expulsion  and  Suspension  from  Membership. 

SEC.  i.  Unless  otherwise  specially  provided,  the  pen- 
alty of  suspension  from  membership  may  be  inflicted, 
and  the  period  of  suspension  determined,  by  the  vote 
of  a  majority  of  the  existing  members  of  the  Governing 
Committee;  and  the  penalty  of  expulsion  from  member- 

139 


STOCK  EXCHANGE  LAWS 

ship  or  of  ineligibility  of  a  suspended  member  for  re- 
admission  may  be  inflicted  by  the  vote  of  two-thirds  of 
the  existing  members  of  said  Committee. 

SEC.  2.  A  member  who  shall  be  adjudged,  by  a 
two-thirds  vote  of  all  the  existing  members  of  the  Gov- 
erning Committee,  to  be  guilty  of  fraud  or  of  fraudu- 
lent acts,  shall  be  expelled  and  the  President  shall  so 
declare;  public  announcement  of  the  expulsion  shall  be 
made  to  the  Exchange  and  the  membership  shall  be 
forthwith  disposed  of  by  the  Committee  on  Admis- 
sions. 

SEC.  3.  Whenever  it  shall  appear  to  a  majority  of 
the  Committee  on  Admissions  that  a  misstatement  upon 
a  material  point  has  been  made  to  it  by  a  member,  upon 
his  application  either  for  membership  or  reinstatement 
or  extension  of  time,  it  shall  report  the  case  to  the 
Governing  Committee,  who  by  a  two-thirds  vote  of  all 
the  existing  members  of  the  Committee  may  expel  the 
member. 

SEC.  4.  Any  member  who  shall  be  connected  di- 
rectly, or  by  a  partner,  or  otherwise,  with  any  organ- 
ization in  the  City  of  New  York  which  permits  dealings 
in  any  securities  or  other  property  admitted  to  dealing 
in  any  department  of  this  Exchange,  shall  be  liable  to 
suspension  for  a  period  not  exceeding  one  year,  or  to 
expulsion,  as  the  Governing  Committee  may  determine. 

SEC.  5.  A  member  making  a  transaction  with  a  non- 
member  in  the,  rooms  of  the  Exchange,  either  purchase, 
sale  or  loari,  in  any  security  or  property  admitted  to 
dealings  in.  any  department  of  the  Exchange,  or  in  money, 

140 


CONSTITUTION,  BY-LAWS  AND  RULES 

shall  be  subject  to  suspension  for  such  period  not  ex- 
ceeding one  year  as  the  Governing  Committee  may 
deem  proper. 

SEC.  6.  A  member  who  shall  have  been  adjudged,  by 
a  majority  vote  of  all  the  existing  members  of  the  Gov- 
erning Committee,  guilty  of  wilful  violation  of  the  Con- 
stitution of  the  Exchange,  or  of  any  resolution  of  the 
Governing  Committee  regulating  the  conduct  or  busi- 
ness of  members,  or  of  any  conduct  or  proceeding  incon- 
sistent with  just  and  equitable  principles  of  trade,  may 
be  suspended  or  expelled  as  the  said  Committee  may 
determine,  unless  some  other  penalty  is  expressly  pro- 
vided for  such  offense. 

SEC.  7.  The  Governing  Committee  may,  by  a  two- 
thirds  vote  of  its  members  present,,  require  that  a  member 
of  the  Exchange  shall  submit  to  the  Governing  Com- 
mittee or  any  Standing  or  Special  Committee,  for  ex- 
amination, such  portion  of  his  books  or  papers  as  are 
material  and  relevant  to  any  matter  under  investiga- 
tion by  said  Committee  or  by  any  Standing  or  Special 
Committee.  Any  member  who  shall  refuse  or  neglect 
to  comply  with  such  requirement,  or  shall  wilfully 
destroy  any  such  required  evidence,  or  who,  being  duly 
summoned,  shall  refuse  or  neglect  to  appear  before  the 
Governing  Committee  or  any  Standing  or  Special  Com- 
mittee, as  a  witness,  or  refuse  to  testify  before  any  such 
Committee,  may  be  adjudged  guilty  of  an  act  detri- 
mental to  the  interest  or  welfare  of  the  Exchange. 

SEC.  8.  The  Governing  Committee  may,  by  a  vote 
of  a  majority  of  all  its  existing  members,  suspend  from 

141 


STOCK  EXCHANGE  LAWS 

the  Exchange  for  a  period  not  exceeding  one  year,  any 
member  who  may  be  adjudged  guilty  of  any  act  which 
may  be  determined  by  said  Committee  to  be  detrimental 
to  the  interest  or  welfare  of  the  Exchange. 

SEC.  9.  An  accusation,  charging  a  member  before 
the  Governing  Committee  with  having  committed  an 
offense,  or  having  violated  the  laws  or  regulations  of 
the  Exchange,  shall  be  in  writing;  it  shall  specify  the 
charge  or  charges  against  such  member  with  reason- 
able detail,  and  shall  be  signed  by  the  person  or  persons 
making  the  charge  or  charges.  A  copy  of  such  charge 
or  charges  shall  be  served  upon  the  accused  member 
either  personally,  or  by  leaving  the  same  at  his  office 
address  during  business  hours,  or  by  mailing  it  to  him  at 
his  place  of  residence.  He  shall  have  ten  days  from  the 
date  of  such  service  to  answer  the  same,  or  such  further 
time  as  the  Governing  Committee  in  its  discretion  may 
deem  proper.  The  answer  shall  be  in  writing,  signed 
by  the  accused  member,  and  filed  with  the  Secretary  of 
the  Exchange.  Upon  the  answer  being  filed,  or  if  the 
accused  shall  refuse  or  neglect  to  make  answer  as  here- 
inbefore required,  the  Governing  Committee  shall,  at  a 
regular  or  special  meeting  thereafter,  proceed  to  con- 
sider the  charge  or  charges;  if  such  meeting  be  a  special 
meeting,  notice  of  the  object  thereof  shall  be  sent  to  the 
members  of  the  Committee.  Notice  of  such  meeting 
shall  be  sent  to  the  accused;  he  shall  be  entitled  to  be 
personally  present  thereat,  and  shall  be  permitted  in 
person  to  examine  and  cross-examine  all  the  witnesses 
produced  before  the  Committee,  and  also  to  present 

142 


CONSTITUTION,  BY-LAWS  AND  RULES 

such  testimony,  defense  or  explanation  as  he  may  deem 
proper.  After  hearing  all  the  witnesses  and  the  mem- 
ber accused,  if  he  desires  to  be  heard,  the  Governing 
Committee  shall  determine  whether  said  member  is 
guilty  of  the  offense  or  offenses  charged.  If  it  determines 
that  the  accused  is  guilty,  the  Governing  Committee 
shall  expel  such  member,  or  may  suspend  him,  as  the 
case  may  be;  the  result  shall  be  announced  to  the  Ex- 
change by  the  President,  and  a  written  notice  thereof 
served  upon  said  member  in  the  manner  hereinbefore 
provided.  The  finding  of  the  Governing  Committee 
shall  be  final  and  conclusive. 

SEC.  10.  Should  a  member  be  accused  before  the  Gov- 
erning Committee  of  misconduct,  or  of  having  com- 
mitted an  offense  the  penalty  for  which  is  limited  to 
suspension  for  a  period  not  exceeding  sixty  days,  said 
Committee  may  proceed  summarily,  and  the  method 
of  procedure  required  by  the  preceding  Section  shall  not 
apply.  The  accused  shall  be  summoned  before  the 
Committee,  informed  of  the  nature  of  the  accusation 
against  him  and  afforded  an  opportunity  for  explana- 
tion by  personal  or  other  testimony.  If  the  Committee 
shall  determine  by  a  majority  vote  of  all  its  existing 
members  that  the  accused  is  guilty,  it  may,  by  a  similar 
vote,  suspend  him  from  membership  for  such  period  as 
the  Constitution  provides. 

SEC.  ii.  Whenever  a  member  is  suspended  by  the 
Governing  Committee,  announcement  thereof  shall  be 
made  to  the  Exchange,  and  such  member  shall  be  deprived 
during  the  term  of  his  suspension  of  all  rights  and  priv- 

143 


STOCK  EXCHANGE  LAWS 

ileges  of  membership,  except  those  pertaining  to  the 
Gratuity  Fund. 

SEC.  12.  No  member  of  the  Exchange  shall  be  al- 
lowed to  be  represented  by  professional  counsel  in  any 
investigation  or  hearing  before  the  Governing  Committee 
or  any  Standing  or  Special  Committee. 

The  Gratuity  Fund  and  Its  Trustees 
ARTICLE  XVIII. 

The  Gratuity  Fund. 

Every  member  of  the  Exchange  shall  be  subject  to 
the  conditions  and  entitled  to  partake  of  the  benefits 
of  the  plan  providing  for  the  families  of  deceased  mem- 
bers as  hereinafter  set  forth. 

SEC.  i.  Every  person  who  shall  become  a  member 
of  the  Exchange  shall  pay  to  the  Trustees  of  the  Gratuity 
Fund  the  sum  of  Ten  dollars  before  he  shall  be  admitted 
to  the  privilege  of  membership. 

SEC.  2.  Upon  the  death  of  a  member  of  the  Exchange 
there  shall  be  levied  and  assessed  against  every  other 
member  the  sum  of  Ten  dollars,  which  shall  thereupon 
become  a  due  from  him  to  the  Exchange,  and  which  shall 
be  charged  and  collected  as  other  dues  and  fines  are  or 
may  be  then  charged  and  collected. 

SEC.  3.  Assessments  under  the  provisions  of  this 
Article  shall  be  made  equally  against  all  members, 
either  living  or  deceased,  until  the  date  of  the  transfer 
of  their  memberships. 

SEC.  4.     The  faith  of  the  Exchange  is  hereby  pledged 

.    144 


CONSTITUTION,  BY-LAWS  AND  RULES 

to  pay,  within  one  year  after  proof  of  death  of  any 
member,  out  of  the  money  collected  under  the  pro- 
visions of  this  Article,  the  sum  of  Ten  thousand  dollars, 
or  so  much  thereof  as  may  have  been  collected,  to  the 
persons  named  in  the  next  Section,  as  therein  provided, 
which  money  shall  be  paid  as  a  gratuity  from  the  other 
members  of  the  Exchange,  free  from  all  debts,  charges 
or  demands  whatever. 

SEC.  5.  Should  the  member  die  leaving  a  widow  and 
no  descendant,  then  the  whole  sum  shall  be  paid  to  such 
widow  for  her  own  use. 

Should  the  member  die  leaving  a  widow  and  descend- 
ants, then  one-half  shall  be  paid  to  the  widow  for  her 
separate  use  and  one-half  to  the  children  for  their  use, 
share  and  share  alike,  provided  that  the  share  of  minor 
children  shall  be  paid  to  their  guardian,  and  that  the 
issue  of  any  deceased  child  shall  be  entitled  to  receive 
the  share  which  said  child  would  have  received  if 
living,  if  of  age  directly,  or  if  minors,  through  his,  her 
or  their  guardian  or  guardians. 

Should  the  member  die  leaving  descendants  and  no 
widow,  then  the  whole  sum  shall  be  paid  to  the  children 
as  directed  in  the  preceding  paragraph  to  be  done  with 
the  moiety;  but  no  adopted  child  shall  share  in  the  grat- 
uity if  the  member  leaves  a  widow  or  descendants. 

Should  the  member  die  leaving  neither  widow  nor 
descendant,  but  an  adopted  child  or  children,  then  the 
whole  sum  shall  be  paid  to  such  adopted  child  or  chil- 
dren, the  issue  of  any  deceased  adopted  child  to  take  the 
share  which  the  parent  would  have  taken  if  living;  pro- 
US 


STOCK  EXCHANGE  LAWS 

vided  that  such  adoption  shall  have  been  in  such  man- 
ner and  form  as  to  be  valid  under  the  laws  of  the  State 
of  New  York. 

Should  the  member  die  leaving  neither  widow,  de- 
scendant, adopted  child  nor  issue  of  a  deceased  adopted 
child,  then  the  whole  sum  shall  be  paid  to  the  same  per- 
sons who  would,  under  the  laws  of  the  State  of  New 
York,  take  the  same  by  reason  of  relationship  to  the 
deceased  member  had  he  owned  the  same  at  the  time 
of  his  death;  and  if  there  be  no  such  person,  then  the 
assessment  levied  in  such  case  shall  be  credited  to  those 
members  of  the  Exchange  against  whom  it  shall  have 
been  charged,  in  reduction  of  their  payments  under  this 
Article. 

In  all  cases  a  certified  copy  of  the  proceedings  before  a 
Surrogate  or  Judge  of  Probate  shall  be  accepted  as  proof 
of  the  rights  of  the  claimants,  be  deemed  ample  authority 
to  the  Exchange  to  pay  over  the  money,  shall  protect  the 
Exchange  in  so  doing,  and  shall  release  the  Exchange 
forever  from  all  further  claim  or  liability  whatsoever. 

SEC.  6.  Nothing  herein  contained  shall  ever  be  taken 
or  construed  as  a  joint  liability  of  the  Exchange  or  its 
members  for  the  payment  of  any  sum  whatever;  the 
liability  of  each  member,  at  law  or  in  equity,  being  limited 
to  the  payment  of  ten  dollars  only  on  the  death  of  any 
other  member,  and  the  liability  of  the  Exchange  being 
limited  to  the  payment  of  the  sum  of  ten  thousand 
dollars,  or  such  part  thereof  as  may  be  collected,  after 
it  shall  have  been  collected  from  the  members,  and  not 
otherwise. 

146 


CONSTITUTION,  BY-LAWS  AND  RULES 

SEC.  7.  Nothing  herein  contained  shall  be  construed 
as  constituting  any  estate  in  esse  which  can  be  mort- 
gaged or  pledged  for  the  payment  of  any  debts;  but  it 
shall  be  construed  as  the  solemn  agreement  of  every 
member  of  the  Exchange  to  make  a  voluntary  gift  to 
the  family  of  each  deceased  member,  and  of  the  Ex- 
change, to  the  best  of  its  ability,  to  collect  and  pay  over 
to  such  family  the  said  voluntary  gift. 

SEC.  8.  There  shall  be  credited  annually  to  each 
member  of  the  Exchange,  in  reduction  of  his  payments 
under  this  Article,  his  proportion  of  the  surplus  income 
of  the  Exchange,  after  setting  apart  such  sum  as  the 
Governing  Committee  shall  determine  to  be  necessary 
for  conducting  the  business  of  the  Exchange. 

Whenever  the  number  of  deaths  of  members  of  the 
Exchange  shall  exceed  fifteen  in  any  one  year,  the 
Trustees  of  the  Gratuity  Fund  shall  pay  over  to  the 
Treasurer  of  the  Exchange  the  net  income  which  has 
been  received  as  interest  on  the  Fund  during  said  year, 
less  the  necessary  expenses  of  management  and  dis- 
tribution, and  each  member  of  the  Exchange  shall  be 
credited  with  his  proportion  of  the  amount,  in  reduction 
of  his  payments  under  this  Article. 

SEC.  9.  The  provisions  of  this  Article  shall  not  ex- 
tend to  any  member  whose  connection  with  the  Ex- 
change shall  have  been  severed  by  the  transfer  of  his 
membership,  whether  the  same  is  made  voluntarily  or 
involuntarily,  nor  to  any  member  who  now  is  or  here- 
after may  be  expelled  by  the  Governing  Committee, 
but  shall  extend  to  suspended  members. 

147 


STOCK  EXCHANGE  LAWS 

ARTICLE  XIX. 

The  Trustees  of  the  Gratuity  Fund. 

SEC.  i.  The  execution  of  the  provisions  of  the 
preceding  Article,  and  the  management  and  distribu- 
tion of  the  Fund  created  thereunder  shall  be  under  the 
charge  of  a  Board  of  Trustees,  to  be  known  as  "The 
Trustees  of  the  Gratuity  Fund,"  and  to  consist  of  the 
President  and  the  Treasurer  of  the  Exchange,  and  of 
five  other  Trustees  chosen  for  the  term  of  five  years. 

In  case  of  a  vacancy  occurring  among  the  five  chosen 
Trustees,  the  Governing  Committee,  at  its  next  regular 
meeting  thereafter,  shall  proceed  to  fill  the  same  until 
the  next  annual  election  of  the  Exchange. 

SEC.  2.  It  shall  be  the  duty  of  the  Trustees  to  in- 
vest and  keep  securely  invested,  in  accordance  with  the 
laws  of  the  State  of  New  York  regulating  Trust  Funds, 
all  moneys  paid  to  them  for  the  Fund,  together  with  the 
interest  and  accretions  arising  therefrom. 

All  stock  shall  be  registered  in  the  name  of  "The 
Trustees  of  the  Gratuity  Fund  of  the  New  York  Stock 
Exchange,"  but  without  specifying  the  individual  names 
of  such  trustees,  and  may  be  disposed  of  and  assigned 
by  any  four  of  said  Trustees. 

SEC.  3.  On  the  first  Monday  after  the  annual  elec- 
tion of  the  Exchange,  or  as  soon  thereafter  as  may  be 
practicable,  the  Trustees  of  the  Gratuity  Fund  shall 
organize  by  electing  a  Chairman,  and  a  Secretary  and 
Treasurer  of  the  Gratuity  Fund,  who  shall  serve  for  one 
year  or  until  their  successors  shall  be  chosen.  The 

148 


CONSTITUTION,  BY-LAWS  AND  RULES 

offices  of  Secretary  and  Treasurer  may  be  held  by  the 
same  person. 

SEC.  4.  There  shall  be  a  regular  meeting  of  the 
Trustees  on  the  third  Monday  in  each  month.  The 
Chairman  may  call  a  special  meeting  at  any  time;  he 
shall  call  a  meeting  at  the  request  of  two  Trustees.  At 
a  meeting  four  Trustees  shall  constitute  a  quorum. 

SEC.  5.  It  shall  be  the  duty  of  the  Chairman  to 
preside  at  meetings;  he  shall  vote  on  all  questions;  he 
shall,  on  the  Monday  preceding  the  annual  election  of 
the  Exchange,  make  a  report  to  the  President  of  the 
Exchange  of  the  condition  of  the  Fund,  with  a  state- 
ment by  the  Treasurer  of  receipts  and  disbursements. 

SEC.  6.  It  shall  be  the  duty  of  the  Secretary  to  keep 
regular  minutes  of  the  proceedings  of  the  Trustees,  and 
to  give  notice  of  meetings. 

SEC.  7.  It  shall  be  the  duty  of  the  Treasurer  to 
receive  and  sign  vouchers  for  all  moneys  paid  to  the 
Trustees,  which  he  shall  deposit  in  such  institutions  as 
they  may  direct,  to  his  credit  as  "Treasurer  of  the  Gra- 
tuity Fund  of  the  New  York  Stock  Exchange." 

He  shall  have  the  custody  of  all  securities  belonging 
to  the  Fund,  subject  to  the  examination  and  control  of 
the  Trustees. 

He  shall  keep,  or  cause  to  be  kept,  proper  books  of 
account. 

He  shall  receive  and  keep  a  record  of  all  claims  for 
payment  under  Article  XVIII  of  the  Constitution  of 
the  Exchange,  and  present  the  same  to  the  Trustees  for 
their  action;  when  allowed  and  approved  by  the  Trus- 

149 


tees,  he  shall  pay  the  same;  but  no  such  payment  shall  be 
made  until  directed  by  the  Trustees. 

He  shall  make  such  investments  for  the  Fund  as  may 
be  ordered  by  the  Trustees. 

His  books  shall  always  be  open  to  the  inspection  of 
any  Trustee,  and  he  shall  make  to  the  Chairman  an 
annual  statement  of  receipts  and  disbursements. 

He  shall  receive  out  of  the  Fund  such  compensation 
per  annum  as  may  be  fixed  by  the  Trustees  and  approved 
by  the  Governing  Committee  of  the  Exchange. 

SEC.  8.  In  case  any  person  entitled  to  any  gratuity 
shall  be  under  age  and  have  no  guardian  entitled  to 
receive  payment  at  the  maturity  thereof,  the  Trustees 
may,  in  their  discretion,  deposit  such  money  with  the 
New  York  Life  Insurance  and  Trust  Company  or  the 
United  States  Trust  Company,  as  the  property  of,  and 
in  trust  for,  such  minor;  and  in  like  manner  if  any 
person  apparently  entitled  to  any  payment  fails  to 
claim,  or  has  disappeared  or  cannot  be  found  after  reason- 
able inquiry,  the  Trustees  may  deposit  the  presumptive 
share  of  such  person  in  either  of  said  Trust  Companies 
to  the  credit  of  "The  Trustees  of  the  Gratuity  Fund  of 
the  New  York  Stock  Exchange,  in  trust/'  to  the  end 
that  it  may  be  paid  to  such  person,  if  afterwards  found, 
or  otherwise  to  the  parties  who  may  subsequently  estab- 
lish their  right  thereto;  a  similar  discretion  shall  apply  in 
the  case  of  any  dispute  between  claimants  for  a  gratu- 
ity or  a  portion  thereof. 

SEC.  9.  The  Trustees  shall  have  power  at  their  dis- 
cretion to  consult  and  employ  legal  counsel;  they  shall 

150 


CONSTITUTION,  BY-LAWS  AND  RULES 

be  authorized  to  make  disbursements  out  of  the  Fund 
to  defray  necessary  expenses,  but  no  such  disburse- 
ments shall  be  allowed  without  a  resolution  specifying 
the  nature  and  amount  of  the  same,  being  entered  at 
large  upon  the  Book  of  Minutes  of  the  Secretary.  Each 
Trustee  shall  receive  from  the  Fund  five  dollars  for 
every  meeting  at  which  he  shall  be  present. 

SEC.  10.  In  case  of  a  vacancy  occurring  in  the  office 
of  Chairman,  or  Secretary  and  Treasurer,  the  Trustees 
shall  forthwith  proceed  to  fill  the  same  for  the  unex- 
pired  term.  In  case  of  the  temporary  absence  or  in- 
ability to  act  of  either  the  Chairman,  or  Secretary  and 
Treasurer,  the  Trustees  shall  have  power  to  appoint 
one  of  their  number  to  act  in  his  stead  pro  tern. 

SEC.  n.  The  Governing  Committee  of  the  Exchange 
shall,  at  all  times,  have  the  right  to  direct  the  production 
before  it  of  the  securities  belonging  to  the  Fund,  the 
Secretary's  Book  of  Minutes  and  the  Treasurer's  books 
of  account. 

It  shall  be  the  duty  of  the  Finance  Committee  of 
the  Exchange  to  make  an  annual  examination  of  the 
condition  of  the  Fund;  and  it  shall  have  the  right  at 
any  time  to  make  such  additional  examination  thereof 
as  it  may  deem  proper. 

SEC.  12.  The  Governing  Committee  of  the  Ex- 
change shall  have  power  to  try  charges  against  any 
Trustee  for  malfeasance  or  negligence  in  office,  and  by 
a  vote  of  two-thirds  of  all  its  existing  members,  to  sus- 
pend him  from  his  functions  or  to  remove  him  and  de- 
clare the  office  vacant. 


STOCK  EXCHANGE  LAWS 

SEC.  13.  It  shall  be  the  duty  of  the  Treasurer  of 
the  Exchange  to  pay  over,  semi-monthly,  all  assessments 
collected  under  Article  XVIII  of  the  Constitution,  to 
the  Treasurer  of  the  Gratuity  Fund. 

Rules  for  Transaction  or  Conduct  of  Business 

ARTICLE  XX. 

Hours  of  Business. 

SEC.  i.  The  Exchange  shall  be  opened  for  the  en- 
trance of  members  upon  every  business  day  at  thirty 
minutes  after  nine  o'clock  A.  M. 

At  ten  o'clock  the  Chairman  shall  announce  that  the 
Exchange  is  open  for  the  transaction  of  business,  and 
it  shall  so  remain  until  three  o'clock  p.  M.,  when  he  shall 
announce  it  to  be  closed.  On  half-holidays  the  closing 
shall  be  at  twelve  o'clock,  noon. 

SEC.  2.  The  Exchange  shall  not  be  closed  at  any 
time  between  the  hours  named  in  the  preceding  Section, 
except  by  order  of  the  Governing  Committee. 

SEC.  3.  Dealings  upon  the  Exchange  shall  be  lim- 
ited to  the  interval  between  the  hours  above  named; 
and  a  fine  of  fifty  dollars  for  each  offense  shall  be  im- 
posed by  the  Chairman,  upon  any  member  who  shall 
make  any  bid,  offer  or  transaction  before  or  after  those 
hours.  Loans  of  money  or  securities  may  be  made 
after  the  official  closing  of  the  Exchange. 

SEC.  4.  Dealing  upon  any  other  Exchange  in  the 
City  of  New  York  or  publicly  outside  of  the  Exchange, 
either  directly  or  indirectly,  in  securities  listed  or  quoted 

152 


CONSTITUTION,  BY-LAWS  AND  RULES 

on  the  Exchange,  is  forbidden;  any  violation  of  this 
rule  shall  be  deemed  to  be  an  act  detrimental  to  the  in- 
terest or  welfare  of  the  Exchange. 

ARTICLE  XXI. 

Calls. 

The  appointment  and  arrangement  of  Calls  of  Stocks 
or  Bonds  shall  be  under  the  control  and  direction  of 
the  Committee  of  Arrangements. 

ARTICLE  XXII. 

Contracts  Subject  to  the  Rules  of  the  Exchange. 
All  contracts  of  a  member  of  the  Exchange,  or  of  a 
firm  having  a  member  of  the  Exchange  as  a  general 
partner,  with  any  other  member  of  the  Exchange,  or 
with  any  other  firm  having  a  member  of  the  Exchange  as 
a  general  partner,  for  the  purchase,  sale,  borrowing, 
loaning  or  hypothecation  of  securities,  or  for  the  bor- 
rowing, loaning,  or  payment  of  money,  whether  occur- 
ring upon  the  floor  of  the  Exchange  or  elsewhere,  are 
contracts  subject  to  the  rules  of  the  Exchange. 

ARTICLE  XXIII. 

Bids  and  Offers. 

SEC.  i.  All  bids  and  offers  made  and  accepted  in 
accordance  with  these  rules  shall  be  binding. 

SEC.  2.  All  offers  to  buy  or  sell  securities  shall  be 
for  100  shares  of  stock  or  for  $10,000  par  value  of  bonds, 
unless  otherwise  stated. 

Offers  to  buy  or  sell  specific  amounts,  other  than  as 


STOCK  EXCHANGE  LAWS 

above  stated  may  be  made  at  the  same  time  and  may 
be  independently  accepted. 

SEC.  3.     Bids  and  offers  may  be  made  only  as  follows: 

(a)  "Cash,"  i.  e.,   for  delivery  upon   the  day  of 
contract; 

(b)  "Regular  Way,"  i.  e.,  for  delivery  upon  the 
business  day  following  the  contract; 

(c)  "At  three  days,"  i.  e.,  for  delivery  upon  the 
third  day  following  the  contract; 

(d)  "Buyer's "  or  "  Seller's "  options  for  not  less  than 
four  days  nor  more  than  sixty  days. 

Bids  and  offers  under  each  of  these  specifications  may 
be  made  simultaneously,  as  being  essentially  different 
propositions,  and  may  be  separately  accepted  without 
precedence  of  one  over  another. 

Bids  and  offers  made  without  stated  conditions  shall 
be  considered  to  be  in  the  "Regular  Way." 

On  transactions  for  more  than  three  days  written 
contracts  shall  be  exchanged  on  the  day  following  the 
transaction,  and  shall  carry  interest  at  the  legal  rate, 
unless  otherwise  agreed;  on  such  contracts  one  day's 
notice  shall  be  given,  at  or  before  2:15  p.  M.,  before  the 
securities  shall  be  delivered  prior  to  the  maturity  of 
the  contract. 

On  offers  to  buy  "Seller's  Option"  or  to  sell  "Buyer's 
Option,"  the  longest  option  shall  have  precedence.  On 
offers  to  buy  "Buyer's  Option"  or  to  sell  "Seller's 
Option,"  the  shortest  option  shall  have  precedence. 

SEC.  4.  All  contracts  falling  due  on  holidays  or 
half-holidays  observed  by  the  Exchange  shall  be  settled 

IS4 


CONSTITUTION,  BY-LAWS  AND  RULES 

on  the  preceding  business  day,  except  that  when  two 
or  more  consecutive  days  are  holidays  or  half-holidays, 
contracts  falling  due  on  other  than  the  first  of  such  days 
shall  be  settled  on  the  next  business  day. 

Loans  of  money  or  securities  made  on  the  day  pre- 
ceding a  holiday  or  half-holiday  observed  by  the  Ex- 
change shall  mature  on  the  succeeding  business  day, 
unless  otherwise  specified. 

SEC.  5.  Bids  or  offers  shall  not  be  made  at  a  less 
variation  than  one-eighth  of  one  per  cent. 

SEC.  6.  Bids  and  offers  shall  be  made  on  the  basis 
of  a  percentage  of  the  par  value  of  the  securities  dealt 
in,  unless  otherwise  ordered  by  the  Governing  Committee. 

SEC.  7.  Any  member  violating  any  of  the  above 
provisions  of  this  Article  shall  be  fined  by  the  Chairman 
in  an  amount  not  exceeding  twenty  dollars;  for  a  rep- 
etition of  the  offense,  he  shall  be  liable  to  suspension 
for  a  period  not  exceeding  ten  days. 

SEC.  8.  Fictitious  transactions  are  forbidden.  Any 
member  violating  this  rule  shall  be  liable  to  suspension 
for  a  period  not  exceeding  twelve  months. 

SEC.  9.  No  offers  to  buy  or  sell  privileges  to  receive 
or  deliver  securities  shall  be  made  publicly  at  the  Ex- 
change, under  penalty  of  a  fine  of  twenty-five  dollars 
for  each  offense. 

ARTICLE  XXIV. 

Comparisons  —  Liability  on  Contracts. 

SEC.  i.  It  shall  be  the  duty  of  every  member  to 
report  each  of  his  transactions  as  promptly  as  possible 


[STOCK  EXCHANGE  LAWS 

at  his  office,  where  he  shall  furnish  opportunity  for 
prompt  comparison. 

SEC.  2.  It  shall  be  the  duty  of  the  SELLER  to  com- 
pare, or  to  endeavor  to  compare,  each  transaction  at 
the  office  of  the  Buyer,  not  later  than  one  hour  after  the 
closing  of  the  Exchange.  Nothing  in  this  Article  shall 
be  construed  to  justify  a  refusal  to  compare  before  the 
closing  of  the  Exchange. 

SEC.  3.  It  shall  be  the  duty  of  the  BUYER  to  inves- 
tigate, before  10  o'clock  A.  M.  of  the  day  after  the 
purchase,  each  transaction  which  has  not  been  compared 
by  the  Seller. 

SEC.  4.  Neglect  of  a  member  to  comply  with  the 
provisions  of  Section  i  or  2  hereof  shall  render  him 
liable  to  a  fine  not  exceeding  fifty  dollars,  to  be  imposed 
by  the  Committee  of  Arrangements. 

SEC.  5.  Comparison  shall  be  made  by  an  exchange 
of  an  original  and  a  duplicate  comparison  ticket;  the 
party  to  whom  the  comparison  ticket  is  presented  shall 
retain  the  original,  if  it  be  correct,  and  immediately 
return  the  duplicate  duly  signed. 

An  exchange  of  Clearing-House  tickets  shall  consti- 
tute a  comparison.  , 

SEC.  6.  Should  a  difference  be  discovered  in  an  at- 
tempt to  compare,  the  exact  liability  of  the  disputants 
shall  be  promptly  established  by  purchase,  sale  or 
mutual  agreement. 

SEC.  7.  If  an  original  party  to  a  transaction  gives 
up  his  principal,  the  latter  shall  have  the  same  duties 
in  the  matter  of  comparison  as  the  original  party. 

156 


CONSTITUTION,  BY-LAWS  AND  RULES 

SEC.  8.  No  comparison  or  failure  to  compare,  and 
no  notification  or  acceptance  of  notification,  shall  have 
the  effect  of  creating  or  of  canceling  a  contract,  or  of 
changing  the  terms  thereof,  or  of  releasing  the  original 
parties  from  liability. 

SEC.  9.  No  party  to  a  contract  shall  be  compelled 
to  accept  a  substitute  principal,  unless  the  name  pro- 
posed to  be  substituted  shall  be  declared  in  making  the 
offer  and  as  a  part  thereof. 

Orders  for  the  receipt  or  delivery  of  securities,  issued 
by  the  Clearing-House,  shall,  however,  be  binding  and 
enforceable  upon  members  or  firms  using  the  facilities 
of  the  Clearing-House. 

SEC.  10.  When  written  contracts  shall  have  been 
exchanged  the  signers  thereof  only  are  liable. 

ARTICLE  XXV. 

Payment  and  Delivery. 

SEC.  i.  In  all  deliveries  of  securities,  the  party 
delivering  shall  have  the  right  to  require  the  purchase 
money  to  be  paid  upon  delivery;  if  delivery  is  made  by 
transfer,  payment  may  be  required  at  time  and  place 
of  transfer. 

SEC.  2.  The  Receiver  of  shares  of  stock  shall  have 
the  option  of  requiring  the  delivery  to  be  made  either 
in  certificates  therefor  or  by  transfer  thereof;  except  that 
in  cases  where  personal  liability  attaches  to  ownership, 
the  Seller  shall  have  the  right  to  make  delivery  by 
transfer. 

157 


STOCK  EXCHANGE  LAWS 

The  right  to  require  receipt  or  delivery  by  transfer 
shall  not  obtain  while  the  transfer  books  are  closed. 

SEC.  3.  Deliveries  of  securities  on  contracts  subject 
to  the  rules  of  the  Exchange  shall  in  all  cases  conform 
to  the  requirements  for  regularity  which  may  be 
made,  from  time  to  time,  by  the  Committee  on  Secur- 
ities. 

SEC.  4.  The  Buyer  must,  not  later  than  two-fifteen 
o'clock  p.  M.,  accept  and  pay  for  all,  or  any  portion  of  a 
lot  of  stock  contracted  for,  which  may  be  tendered 
in  lots  of  one  hundred  shares  or  multiples  thereof; 
and  he  may  buy  in  "under  the  rule"  the  undelivered 
portion,  in  accordance  with  the  provisions  of  Article 
XXVIII. 

This  rule  shall  also  apply  to  contracts  for  bonds  when 
tender  is  made  in  lots  of  ten  thousand  dollars  or  multi- 
ples thereof. 

ARTICLE  XXVI. 

Settlement  of  Contracts, 

SEC.  i.  All  deliveries  of  securities  must  be  made 
before  quarter  after  two  o'clock  p.  M.,  and  when  de- 
liveries are  not  made  by  that  time  the  contract  may  be 
closed  "under  the  rule"  in  the  manner  provided  in 
Article  XXVIII  of  these  Rules.  In  the  absence  of 
any  notice  or  agreement  the  contract  shall  continue 
without  interest  until  the  following  business  day;  but 
in  every  case  of  non-delivery  of  securities  the  party  in 
default  shall  be  liable  for  any  damages  which  may  ac- 
crue thereby;  and  all  claims  for  such  damages  must  be 

158 


CONSTITUTION,  BY-LAWS  AND  RULES 

made  before  three  o'clock  p.  M.,  on  the  business  day 
following  the  default. 

SEC.  2.  The  neglect  or  failure  of  a  member  or  firm 
to  exchange  Clearing-House  tickets  on  a  contract,  in 
conformity  with  the  "Rules  for  Clearing,"  shall  consti- 
tute a  default;  and  such  defaulted  contract  may  be 
closed  as  provided  in  Article  XXVIII;  except  that  the 
limit  of  time  for  delivery  of  notice  of  intention  to  close 
such  contract  shall  be  ten- thirty  o'clock  A.  M.  of  the 
following  business  day,  and  the  time  for  closing  shall  not 
be  before  eleven  o'clock  A.  M. 

SEC.  3.  Parties  receiving  securities  shall  not  de- 
duct, from  the  purchase  price,  any  damages  claimed  for 
non-delivery,  except  by  the  consent  of  the  party  deliv- 
ering the  same. 

SEC.  4.  Notice  for  the  return  of  loans  of  money,  or 
of  securities  not  admitted  to  the  Clearing-House,  must 
be  given  before  one  o'clock  p.  M.  Notice  for  the  return 
of  loans  of  securities  admitted  to  the  Clearing-House 
must  be  given  before  three-thirty  o'clock  p.  M.,  except 
on  half-holidays  observed  by  the  Exchange,  when  such 
notice  must  be  given  before  twelve-thirty  o'clock  p.  M. 
All  such  notices  shall  be  considered  as  in  full  force  until 
delivery  is  made. 

SEC.  5.  On  half-holidays  observed  by  the  Exchange, 
securities  sold  specifically  for  "Cash"  must  be  delivered 
and  received  at  or  before  eleven- thirty  o'clock  A.  M. 
In  case  of  default  the  contract  may  be  closed  after 
eleven-forty  o'clock  A.  M.  "under  the  rule,"  in  manner 
provided  in  Article  XXVIII. 

159 


STOCK  EXCHANGE  LAWS 

ARTICLE  XXVII. 

Clearing-House. 

SEC.  i.  There  shall  be  a  Clearing-House  for  the  pur- 
pose of  acting  as  the  common  agent  of  the  members 
of  the  Exchange  in  receiving  and  delivering  such  se- 
curities as  may  from  time  to  time  be  designated  by  the 
Clearing-House  Committee. 

SEC.  2.  Nothing  in  the  conduct  of  the  business  of 
clearing  shall  attach  any  liability  to  the  Exchange,  or  to 
any  member  of  the  Clearing-House  Committee,  and  de- 
lays on  the  part  of  the  Clearing-House  shall  not  attach 
any  liability  to  members  who  are  clearing. 

SEC.  3.  The  Clearing-House  Committee  shall  des- 
ignate from  time  to  time  the  securities  which  shall  be 
cleared,  and,  in  all  transactions  in  such  securities,  the 
deliveries  shall  be  made  through  the  Clearing-House, 
unless  otherwise  specially  stipulated  in  the  bid  or  offer 
or  otherwise  agreed  upon. 

SEC.  4.  The  "Rules  for  Clearing"  and  the  "Rules 
for  Dealing"  adopted  by  the  Governing  Committee,  and 
all  amendments  thereto,  shall  be  binding  upon  the  mem- 
bers of  the  Exchange  equally  with  the  laws  included  in 
the  Constitution. 

Amendments  to  "Rules  for  Clearing"  or  to  "Rules 
for  Dealing"  may  be  adopted  by  a  vote  of  two- thirds 
of  all  the  existing  members  of  the  Governing  Committee 
and  need  not  be  submitted  to  the  members  of  the  Ex- 
change for  approval. 


1 60 


CONSTITUTION,  BY-LAWS  AND  RULES 

ARTICLE  XXVIII. 

Closing  Contracts  "Under  the  Rule.' 

SEC.  i.  When  the  insolvency  of  a  member  or  firm 
is  announced  to  the  Exchange,  members  having  con- 
tracts subject  to  the  rules  of  the  Exchange  with  the 
member  or  firm,  shall  without  unnecessary  delay  pro- 
ceed to  close  the  same.  If  the  contracts  involve  se- 
curities admitted  to  quotation  upon  the  Exchange  the 
closing  must  be  in  the  Exchange,  either  officially  by  the 
Chairman,  or  by  personal  purchase  or  sale.  If  the  con- 
tracts involve  securities  not  dealt  in  on  the  Exchange, 
the  purchase  or  sale  of  such  securities  must  be  promptly 
made  in  the  best  available  market.  Should  a  contract 
not  be  closed,  as  above  provided,  the  price  of  settle- 
ment shall  be  fixed  by  the  price  current  at  the  time 
when  such  contract  should  have  been  closed  under  this 
rule. 

SEC.  2.  A  contract  which  has  not  been  fulfilled 
according  to  the  terms  thereof  may  be  officially  closed 
"under  the  rule"  by  the  Chairman,  as  herein  provided. 

Notice  of  intention  to  make  such  closing  of  a  con- 
tract must  be  delivered,  at  or  before  two-thirty  o'clock 
p.  M.,  at  the  registered  office  address  of  the  member  or 
firm  in  default.  And  the  Chairman  shall  not  close  such 
contract  before  two  thirty-five  o'clock  p.  M. 

SEC.  3.  Every  notice  of  intention  to  close  a  con- 
tract "under  the  rule,"  because  of  non-delivery,  shall 
be  in  writing;  and  shall  state  the  name  of  the  member  or 
firm  by  whom  the  order  is  given,  also  for  whose  account 

161 


STOCK  EXCHANGE  LAWS 

—  all  of  which  shall  be  announced  by  the  Chairman  be- 
fore closing  the  contract. 

The  closing  of  a  contract  "under  the  rule,"  made  in 
conformity  with  such  notice,  shall  be  also  for  the  ac- 
count and  liability  of  each  succeeding  party  in  interest. 

SEC.  4.  Notice  of  intention  to  close  a  contract 
"under  the  rule"  may  be  given  upon  the  entire  amount 
in  default  or  upon  any  portion  thereof,  but  in  this  latter 
case  for  not  less  than  one  hundred  shares  of  stock  or 
ten  thousand  dollars  of  bonds. 

SEC.  5.  When  notice  that  a  contract  will  be  closed 
"under  the  rule"  is  received  too  late  for  transmission 
to  other  members  or  firms  interested  in  such  contract, 
within  the  times  stated  therefor,  the  notified  member  or 
firm  who  is  unable  to  so  transmit  said  notice  may,  immedi- 
ately after  the  official  closing  "under  the  rule,"  reestablish 
such  contract  by  a  new  purchase  or  sale  in  the  "regular 
way";  and  any  loss  arising  therefrom  shall  be  a  valid 
claim  against  the  successive  party  or  parties  in  interest. 

SEC.  6.  When  a  member  has  issued  a  notice  of  in- 
tention to  close  a  contract  "under  the  rule,"  for  de- 
fault in  delivery,  he  must  receive  and  pay  for  secur- 
ities due  upon  such  contract  if  tendered  at  his  office 
within  five  minutes  of  the  official  time  for  closing;  or 
thereafter,  if  tendered  at  the  rostrum  of  the  Exchange, 
before  the  Chairman  has  closed  the  contract. 

SEC.  7.  When  a  contract  has  been  closed  "under 
the  rule,"  the  member  or  firm  who  gave  the  order  must 
give  prompt  notice  of  such  closing  to  the  member  or 
firm  in  default. 

162 


CONSTITUTION,  BY-LAWS  AND  RULES 

Notification  to  successive  parties  in  interest  must  be 
transmitted  without  delay,  and  claims  for  damages, 
arising  therefrom,  must  be  made  prior  to  three  o'clock 
p.  M.  of  the  business  day  following  the  closing  of  the 
contract. 

SEC.  8.  When  a  contract  has  been  closed  "under  the 
rule"  the  Chairman  shall  endorse  upon  the  order  there- 
for the  name  of  the  purchaser  or  seller,  the  price  and  the 
hour  at  which  such  contract  is  closed,  and  deliver  the 
order  to  the  Secretary  of  the  Exchange,  who  shall  as- 
certain whether  the  money  difference,  if  any,  has  been 
paid.  If  such  difference  shall  not  be  paid  within  twenty- 
four  hours  after  the  closing  of  the  contract,  the  Secretary 
shall  report  such  default  to  the  President. 

SEC.  9.  When  a  contract  is  closed  "under  the 
rule,"  any  member  or  firm  accepting  the  bid  or  offer,  as 
made  by  the  Chairman,  and  not  complying  promptly 
therewith,  shall  be  liable  for  any  damages  resulting  there- 
from. 

The  member  or  firm,  for  whose  account  a  contract  is 
being  closed  "under  the  rule,"  shall  not  be  permitted 
to  accept  the  bid  or  offer  made  by  the  Chairman. 

SEC.  10.  When  a  loan  of  money  is  not  paid  at  or 
before  two-fifteen  o'clock  p.  M.  of  the  day  upon  which 
it  becomes  due,  the  borrower  shall  be  considered  as 
in  default,  and  the  lender  may  sell  "under  the  rule" 
the  securities  pledged  therefor,  or  so  much  thereof 
as  may  be  necessary  to  liquidate  the  loan,  in  the  man- 
ner prescribed  in  the  foregoing  Sections  of  this  Ar- 
ticle. 

163 


STOCK  EXCHANGE  LAWS 

ARTICLE  XXIX. 

Irregularity  in  Securities, 

Reclamation  for  irregularity  in  a  security,  when  such 
irregularity  affects  only  its  currency  in  the  market,  must 
be  made  within  ten  days  from  day  of  delivery  of  the 
security. 

ARTICLE  XXX. 

Disagreement  on  Terms  of  Contract. 

When  a  disagreement  arising  from  a  transaction  in 
securities  shall  be  discovered,  the  money  difference  shall 
forthwith  be  established  by  purchase  or  sale  by  the 
Chairman,  or  by  mutual  agreement. 

ARTICLE  XXXI. 

Deposits  on  Contracts. 

SEC.  i.  Mutual  cash  deposits  of  not  exceeding  ten 
per  cent,  may  be  required  at  any  time  by  either  party 
to  a  contract.  Whenever  the  margin  of  either  party 
becomes  reduced  to  five  per  cent,  by  reason  of  changes 
in  the  market  value  of  the  securities,  further  deposits 
may  be  called,  from  time  to  time,  sufficient  to  restore 
the  impaired  margin. 

SEC.  2.  The  holder  of  a  due-bill  issued  for  the  divi- 
dend on  stock  contracted  for,  may  require  the  maker 
of  the  due-bill  to  deposit  the  full  amount  due  thereon, 
in  a  Trust  Company,  payable  to  the  joint  order  of  both 
parties. 

164 


CONSTITUTION,  BY-LAWS  AND  RULES 

SEC.  3.  When  deposits  are  called  before  two  o'clock 
p.  M.,  they  must  be  made  at  or  before  two- thirty  o'clock 
of  the  same  day;  if  called  after  two  o'clock  p.  M.  they 
must  be  made  at  or  before  ten- thirty  o'clock  A.  M.  of 
the  following  business  day. 

On  half-holidays  observed  by  the  Exchange,  deposits 
called  before  eleven  o'clock  A.  M.  must  be  made  at  or 
before  eleven-thirty  o'clock  A.  M.;  if  called  after  eleven 
o'clock  A.  M.  they  must  be  made  at  or  before  ten-thirty 
o'clock  A.  M.  of  the  next  business  day. 

SEC.  4.  Failure  of  either  party  to  a  contract  to  com- 
ply with  a  demand  for  a  deposit  shall  constitute  a  de- 
fault; and  the  other  party  to  the  contract  may  report 
such  default  to  the  Chairman,  and  instruct  him  to  re- 
establish the  contract  forthwith,  by  a  new  purchase  or 
sale  " under  the  rule,"  and  any  difference  arising  there- 
from shall  be  paid  to  the  party  entitled  thereto. 

Written  notice  of  intention  to  reestablish  the  con- 
tract shall  be  sent  to  the  office  of  the  party  in  default. 

SEC.  5.  Unless  otherwise  mutually  agreed,  deposits 
on  contracts  shall  be  made  in  the  New  York  Life  Insur- 
ance and  Trust  Company. 

ARTICLE  XXXII. 

Dividends  —  Interest  —  Premium. 

SEC.  i.  On  the  day  of  closing  of  the  transfer  books 
of  a  corporation  for  a  dividend  upon  its  shares  all  trans- 
actions therein  for  "Cash"  shall  be  "dividend  on"  up 
to  the  time  officially  designated  for  the  closing  of  trans- 

165 


STOCK  EXCHANGE  LAWS 

fers;  all  transactions  on  that  day  other  than  for  "Cash" 
shall  be  "ex-dividend." 

Should  the  closing  of  transfers  occur  upon  a  holiday 
or  half-holiday,  observed  by  the  Exchange,  transactions 
on  the  preceding  business  day,  other  than  for  "Cash," 
shall  be  "ex-dividend." 

SEC.  2.  The  buyer  shall  be  entitled  to  receive  all 
interest,  dividends,  rights  and  privileges,  except  voting 
power,  which  may  pertain  to  the  securities  contracted 
for,  and  for  which  the  transfer  books  shall  close  during 
the  pendency  of  the  contract. 

When  such  contract  shall  mature  before  the  official 
date  for  payment  of  interest  or  dividend,  the  seller  shall 
deliver  a  due-bill  therefor  signed  or  endorsed  by  him. 

When  a  security  is  sold  before  the  day  of  closing  books 
for  "Rights"  (and  is  quoted  "ex-Rights"  on  that  day), 
and  is  delivered  thereafter,  the  buyer  shall  on  its  de- 
livery pay  only  the  market  price  of  the  security  "ex- 
Rights."  He  shall  pay  the  balance  due  on  the  contract, 
when  the  seller  delivers  the  "Rights,"  at  any  time  on 
or  before  the  day  set  by  the  Committee  on  Securities  for 
settlement  of  contracts  in  "Rights." 

When  a  security  is  loaned  before  the  day  of  closing 
books  for  "Rights"  (and  is  quoted  "ex-Rights"  on  that 
day),  and  is  returned  thereafter,  the  lender  shall  on  its 
return  pay  only  the  market  price  of  the  security  "ex- 
Rights."  He  shall  pay  the  balance  due  on  the  contract, 
when  the  borrower  delivers  the  "Rights,"  at  any  time 
on  or  before  the  day  set  by  the  Committee  on  Securities 
for  settlement  of  contracts  in  "Rights." 

166 


CONSTITUTION,  BY-LAWS  AND  RULES 

SEC.  3.  A  charge  of  one  per  cent,  may  be  made  for 
collecting  dividends.  For  scrip  or  stock  dividends  the 
charge  shall  be  computed  upon  the  market  value  of 
such  scrip  or  stock. 

No  charge  shall  be  made  for  collecting  dividends  ac- 
cruing on  securities  deliverable  on  a  contract. 

SEC.  4.  Offers  to  buy  or  sell  dividends  shall  not  be 
made  publicly  on  the  Exchange.  The  Chairman  shall 
impose  a  fine  of  twenty-five  dollars  for  each  violation  of 
this  rule. 

SEC.  5.  When  securities  are  borrowed  or  loaned  the 
sum  agreed  upon,  either  as  interest  for  carrying  or  as 
premium  for  use,  shall  be  paid  whether  such  securities 
are  delivered  or  not. 

SEC.  6.  When  money  or  securities  are  loaned  at  a 
premium  said  premium  shall  apply  to  the  day  for  which 
the  loan  is  made. 

ARTICLE  XXXIII. 

Transfer  and  Registry. 

SEC.  i.  Corporations  whose  shares  are  admitted  to 
dealings  upon  the  Exchange  will  be  required  to  maintain 
a  Transfer  Agency  and  a  Registry  office  in  the  City  of 
New  York,  Borough  of  Manhattan.  Both  the  Trans- 
fer Agency  and  the  Registrar  must  be  acceptable  to  the 
Committee  on  Stock  List,  and  the  Registrar  must  file 
with  the  Secretary  of  the  Exchange  an  agreement  to 
comply  with  the  requirements  of  the  Exchange  in  regard 
to  registration. 

SEC.  2.  When  a  corporation  purposes  to  increase  its 

167 


STOCK  EXCHANGE  LAWS 

authorized  capital  stock,  thirty  days'  notice  of  such  pro- 
posed increase  must  be  officially  given  to  the  Exchange, 
before  such  increase  may  be  admitted  to  dealings. 

SEC.  3.  When  the  capital  stock  of  a  corporation  is 
increased  through  conversion  of  convertible  bonds, 
already  listed,  the  issuing  corporation  shall  give  imme- 
diate notice  to  the  Exchange  and  the  Committee  on 
Stock  List  may,  thereupon,  authorize  the  registration 
of  such  shares  and  add  them  to  the  list. 

SEC.  4.  The  Governing  Committee  may  suspend 
dealings  in  the  securities  of  any  corporation  previously 
admitted  to  quotation  upon  the  Exchange,  or  it  may 
summarily  remove  any  securities  from  the  list. 

SEC.  5.  After  the  admission  of  a  security  to  dealings 
upon  the  Exchange  no  change  in  the  form  of  certificate, 
or  of  the  Transfer  Agency  or  the  Registrar  of  Shares,  or 
of  the  Trustee  of  Bonds  shall  be  made  without  the  ap- 
proval of  the  Committee  on  Stock  List. 

ARTICLE  XXXIV. 

Commissions. 

SEC.  i.  Commissions  shall  be  charged  and  paid, 
under  all  circumstances,  upon  all  purchases  or  sales 
of  securities  dealt  in  upon  the  Exchange;  and  shall  be 
absolutely  net,  and  free  from  all  or  any  rebatement,  re- 
turn, discount  or  allowance  in  any  shape  or  manner 
whatsoever,  or  by  any  method  or  arrangement,  direct 
or  indirect;  and  no  bonus,  nor  any  percentage  or  portion 
of  the  commission,  shall  be  given,  paid  or  allowed, 

168 


CONSTITUTION,  BY-LAWS  AND  RULES 

directly  or  indirectly,  or  as  a  salary,  or  portion  of  a  salary, 
to  any  clerk  or  person,  for  business  sought  or  procured 
for  any  member  of  the  Exchange. 

SEC.  2.  All  commissions  shall  be  calculated  upon  the 
par  value  of  securities  and  the  rates  shall  be  as  follows : 

(a)  On  business  for  parties  not  members  of  the 
Exchange,  including  joint-account  transactions  in  which 
a  non-member  is  interested,  transactions  for  partners 
not  members  of  the  Exchange,  and  for  firms  of  which 
the  Exchange  member  or  members  are  special  partners 
only,  the  commission  shall  be  not  less  than  one-eighth 
of  one  per  cent. 

(6)  On  business  for  members  of  the  Exchange,  the 
commission  shall  be  not  less  than  one-thirty-second  of 
one  per  cent.,  except  when  a  principal  is  given  up,  in 
which  case  the  commission  shall  be  not  less  than  one- 
fiftieth  of  one  per  cent. 

(c)  On   Mining  Shares,    Subscription    Rights,    and 
Notes  of  Corporations,  such  rates,  to  members  and  non- 
members,  as  may  be  determined,  from  time  to  time,  by 
the  Committee  on  Commissions,  with  the  approval  of 
the  Governing  Committee. 

(d)  Government  and  Municipal  Securities  are  ex- 
empted from  the  provisions  of  this  Article. 

SEC.  3.  A  firm  having  as  a  general  partner  a  mem- 
ber of  the  Exchange,  shall  be  entitled  to  have  its  business 
transacted  at  the  rates  of  commission  hereinbefore  pre- 
scribed for  members.  A  member  of  the  Exchange  can- 
not confer  this  privilege  upon  more  than  one  firm  at 
any  one  time. 

169 


STOCK  EXCHANGE  LAWS 

The  privileges  provided  for  under  this  Section  can 
only  be  conferred  upon  a  Branch  House  in  this  country 
when  established  under  the  same  name  as  the  parent 
firm  and  in  which  the  partners  and  their  respective 
interests  are  identical  with  those  of  the  parent  firm. 

SEC.  4.  A  proposition  for  the  transaction  of  business, 
at  less  than  the  minimum  rates  of  commission  herein 
provided,  shall  constitute  a  violation  of  this  article. 

SEC.  5.  A  member  suspended  by  the  Governing  Com- 
mittee shall  not,  during  the  time  of  his  suspension,  be 
entitled  to  have  his  business  transacted  at  member's 
rates  of  commission. 

A  member  who  is  in  suspension  by  reason  of  insolvency 
may  have  his  business  transacted  at  member's  rates. 

SEC.  6.  If  the  Governing  Committee  shall,  by  a 
majority  vote  of  all  its  existing  members,  determine  that 
a  member  of  the  Exchange  has  violated  the  provisions 
of  this  Article,  it  shall  suspend  such  member,  for  the 
first  offense,  for  such  period  not  less  than  one  year  nor 
more  than  five  years,  as  a  majority  of  the  members  of 
said  Committee  present  may  determine.  A  member 
adjudged  guilty  of  a  second  offense,  by  a  majority  vote 
of  all  the  existing  members  of  the  Governing  Committee, 
shall  be  expelled  by  a  like  vote. 

ARTICLE  XXXV. 

Office  Address  —  Partnerships  —  Branch  Offices. 

SEC.  i.  Every  member  shall  register  with  the  Sec- 
retary an  address,  and  subsequent  changes  thereof,  where 

170 


CONSTITUTION,  BY-LAWS  AND  RULES 

notices  may  be  served.  The  registered  address  of  every 
member  transacting  business  upon  the  Exchange  must 
be  in  its  vicinity. 

SEC.  2.  When  a  member  shall  forma  partnership  he  shall 
immediately  register  the  same  with  the  Secretary;  offi- 
cial announcement  thereof  shall  be  made  to  the  Exchange 
and  notice  posted  upon  the  bulletin  for  ten  days.  Notice 
of  dissolution  of  partnership  must  be  given  in  like  manner. 

SEC.  3.  No  person  shall  be  eligible  to  either  general 
or  special  partnership  in  more  than  one  registered  firm 
at  the  same  time. 

This  law  shall  not  obtain,  however,  when  a  member 
of  a  registered  firm  forms  a  partnership  in  a  foreign 
country  under  the  same  or  different  name  from  that  of 
his  firm  in  this  country;  provided,  however,  that  the 
firm  in  said  foreign  country  shall  not  derive  any  benefit 
from  the  privileges  which  attach  to  members  of  firms 
registered  at  the  Stock  Exchange. 

Sec.  4.  A  member  shall  not  form  a  partnership  with 
a  suspended  member  of  the  Exchange,  nor  with  any  per- 
son who  has  been  expelled  therefrom;  nor  with  any 
insolvent  person,  or  with  any  person  who  may  have  pre- 
viously been  a  member  of  the  Exchange,  and  against 
whom  any  member  holds  a  claim,  arising  out  of  trans- 
actions made  during  the  time  of  such  membership,  and 
which  has  not  been  released,  or  settled  in  accordance 
with  the  laws  of  the  Exchange. 

A  member,  who  is  a  special  partner  in  a  firm,  does  not 
thereby  confer  any  of  the  privileges  of  the  Exchange 
on  such  firm. 

171 


STOCK  EXCHANGE  LAWS 

SEC.  5.  A  member  of  the  Exchange  who  is  a  general 
partner  in  a  firm  represented  thereon  is  liable  to  the 
same  discipline  and  penalties  for  any  act  or  omission  of 
said  firm  as  if  the  same  were  committed  by  him  per- 
sonally; but  the  Governing  Committee  may  in  its  dis- 
cretion by  a  vote  of  not  less  than  thirty  members  relieve 
him  from  the  penalty  therefor. 

SEC.  6.  Members  may,  by  the  consent  and  approval  of 
the  Committee  on  Commissions,  establish  Branch  Offices. 
Such  offices  must  be  in  charge  of  either  a  partner,  or  of  a 
manager  or  clerk  acceptable  to  said  Committee. 

The  member  or  firm  establishing  a  Branch  Office  shall 
register  it  with  the  Secretary  of  the  Exchange,  and  shall 
be  directly  responsible  for  the  conduct  of  its  business. 

The  managing  clerk  and  all  other  employees  must  be 
paid  fixed  salaries,  not  varying  with  the  business. 

No  agents  for  the  solicitation  of  business,  shall  be 
employed  on  any  other  than  the  foregoing  basis. 

SEC.  7.  Whenever  it  shall  appear  to  the  Governing 
Committee  that  a  member  has  formed  a  partnership,  or 
established  a  branch  office,  or  is  individually  or  through 
any  member  of  his  firm,  interested  in  a  partnership  in  a 
foreign  country,  whereby  the  interest  or  good  repute  of 
the  Exchange  may  suffer,  the  Committee  may  require 
the  dissolution  of  such  partnership,  the  discontinuance 
of  the  interest  in  said  foreign  partnership,  or  of  such 
branch  office,  as  the  case  may  be. 

SEC.  8.  Any  member  failing  to  comply  with  any 
requirement  of  this  Article,  or  with  any  requirement  of 
the  Governing  Committee  in  regard  thereto,  shall  be 

172 


CONSTITUTION,  BY-LAWS  AND  RULES 

liable   to  suspension  for   a  period  not  exceeding  one 
year. 

ARTICLE  XXXVI. 

Disorderly  Conduct. 

SEC.  i.  Indecorous  language,  or  an  act  subversive  of 
good  order  and  decorum,  or  serious  interference  with  the 
personal  comfort  or  safety  of  another  person  is  forbidden. 
Any  member  who  shall  violate  this  rule,  within  the  lim- 
its of  any  department  of  the  Exchange,  may  be  fined  by 
the  Chairman,  or  by  the  Committee  of  Arrangements, 
in  a  sum  not  exceeding  fifty  dollars;  or  upon  complaint 
made  may  be  summoned  before  the  Governing  Com- 
mittee and  suspended  for  a  period  not  exceeding  sixty 
days. 

SEC.  2.  The  Committee  of  Arrangements  may  make 
rules  to  govern  the  conduct  of  members  upon  the  Ex- 
change; it  may  impose  a  fine,  not  exceeding  fifty  dollars, 
for  each  violation  thereof,  or  may  report  the  delinquent 
to  the  Governing  Committee,  who  may  suspend  him  for 
a  period  not  exceeding  sixty  days. 

SEC.  3.  Betting  or  offering  to  bet,  upon  the  floor  of 
the  Exchange,  is  forbidden.  A  member  violating  this 
rule  shall  be  subject  to  the  penalties  prescribed  in  the 
preceding  Section  of  this  Article. 

ARTICLE  XXXVII. 

Minutes  —  Visitors  —  Communications. 
SEC.  i.    Members  shall  have  access  to  the  minutes 
of  the  Exchange. 


STOCK  EXCHANGE  LAWS 

SEC.  2.  Visitors  shall  not  be  admitted  to  the  floor 
of  the  Exchange  except  by  permission  of  the  President 
or  the  Committee  of  Arrangements. 

SEC.  3.  Communications  shall  not  be  read  to  the 
Exchange  without  the  consent  of  the  President  or  the 
Committee  of  Arrangements. 

ARTICLE  XXXVIII. 

Alterations  of  the  Constitution. 

The  Governing  Committee  may  make  additions,  al- 
terations or  amendments  to  the  Constitution  by  a  major- 
ity vote  of  all  its  existing  members.  Every  proposed 
addition,  alteration  or  amendment  must  be  presented, 
in  writing,  at  a  regular  meeting  of  the  Governing  Com- 
mittee, and  referred  to  the  Committee  on  Constitution, 
which  shall  report  thereon  at  the  next  regular  meeting 
of  the  Governing  Committee,  or  at  a  special  meeting 
called  for  the  sole  purpose  of  considering  it.  Action 
thereon  may  be  postponed  to  a  fixed  date  by  a  vote  of 
two-thirds  of  the  members  of  the  Governing  Committee 
present.  Such  alterations  when  adopted  by  the  Gov- 
erning Committee  shall  be  submitted  to  the  Exchange 
and  shall  stand  as  the  law  of  the  Exchange,  if  not  dis- 
approved within  one  week  by  a  majority  vote  of  the 
entire  membership. 

No  alteration  of  Article  XVIII  shall  ever  be  made 
which  will  impair,  in  any  essential  particular,  the  obliga- 
tion of  each  member  to  contribute,  as  therein  provided, 
to  the  provision  for  the  families  of  deceased  members. 

174 


CONSTITUTION,  BY-LAWS  AND  RULES 

Resolutions  Adopted  by  the  Governing  Committee. 

Advertising. 

FEBRUARY  9,  1898. 

"That  in  future  the  publication  of  an  advertisement 
of  other  than  a  strictly  legitimate  business  character,  by 
a  member  of  the  Exchange,  shall  be  deemed  an  act  detri- 
mental to  the  interest  and  welfare  of  the  Exchange." 

Arbitrage  Dealings. 

JANUARY  26,  1898. 

"Whereas,  The  so-called  Arbitrage  business  or  trading 
between  this  Exchange  and  that  of  any  other  city  in 
the  United  States,  based  upon  quotations  from  the  floor 
of  this  Exchange,  has  resulted  in  practically  ignoring 
the  commission  law;  therefore 

"Resolved,  That  in  the  judgment  of  this  Committee 
the  sending  of  continuous  quotations  or  quotations  at 
frequent  intervals  by  members  of  this  Exchange,  from 
the  floor  of  the  Exchange,  is  detrimental  to  the  interest 
and  welfare  of  the  Exchange,  and  that  any  member 
engaging  in  such  business  or  trading  shall  be  proceeded 
against  under  Section  8  of  Article  XVII  of  the  Consti- 
tution ; 

"Resolved,  That  the  Committee  of  Arrangements  be 
and  they  hereby  are  authorized  and  instructed  to  pre- 
vent the  transaction  of  any  such  business  or  trading 
by  any  member  of  this  Exchange,  and  to  prefer  charges 
against  any  member  engaging  therein." 


STOCK  EXCHANGE  LAWS 

Foreign  Arbitrage  —  Joint  Accounts. 

APRIL  20,  1911. 
(To  take  effect  July  i,  1911.) 

"Whereas,  The  so-called  Arbitrage  business  by  means 
of  joint  account  trading  between  this  Exchange  and 
foreign  cities,  where  each  party  interested  charges  a 
commission  or  allowance,  has  resulted  in  practically 
nullifying  the  Commission  Law;  therefore 

"Resolved,  That  any  business,  domestic  or  foreign, 
for  the  joint  account  of  a  member  of  the  Exchange  and 
a  non-member,  where  each  party  in  interest  charges  a 
commission  or  allowance,  is  hereby  prohibited; 

"Resolved,  That  any  business,  domestic  or  foreign, 
conducted  under  an  arrangement  of  accounts,  not  joint 
account  in  name,  but  designed  to  produce  results  similar 
to  those  of  the  above  described  joint  account,  is  hereby 
prohibited." 

Bids  and  Offers. 

DECEMBER  14,  1898. 

"That  where  parties  have  orders  to  buy  and  orders  to 
sell  the  same  security,  said  parties  must  offer  said  se- 
curity, whether  it  be  stock  or  bonds,  at  one-eighth  per 
cent,  higher  than  their  bid  before  making  transactions 
with  themselves." 

Rules  Covering  Bids  and  Offers. 

MARCH  30,  1910. 
(Amended  May  12,  1911.) 

i.  That  the  recognized  quotation  on  stocks  shall  be 
public  bids  and  offers  on  lots  of  100  shares. 

176 


CONSTITUTION,  BY-LAWS  AND  RULES 

2.  All  bids  and  offers  on  larger  lots  shall  be  consid- 
ered to  be  for  any  part  thereof  in  lots  of  100  shares  or  of 
multiples  thereof,  whether  so  stated  in  the  bid  or  offer 
or  not. 

3.  If  a  bid  is  made  for  a  larger  lot  of  stock  above  the 
price  at  which  smaller  lots  are  offered,  or  if  a  transaction 
is  made  in  a  larger  lot  above  the  price  at  which  smaller 
lots  are  offered,  such  bidder  or  buyer  shall  be  compelled 
to  buy  any  or  all  of  the  smaller  lots  which  were  pub- 
licly offered  at  the  time,  at  the  lower  price,  up  to  the 
amount  of  the  bid  for  the  larger  lot.     If  the  bid  for  the 
larger  lot  is  accepted,  and  the  buyer  is  unwilling  to  buy 
more,  the  seller  must  give  up  to  the  members  who  were 
publicly  offering  to  sell  at  the  lower  price,  such  amounts 
as  they  were  publicly  offering  to  sell  at  the  lower  price, 
if  such  claim  is  made  immediately. 

4.  If  an  offer  is  made  to  sell  a  larger  lot  of  stock 
below  the  price  which  is  bid  for  smaller  lots,  or  if  a  trans- 
action is  made  in  a  larger  lot  below  the  price  which  is 
bid  for  smaller  lots,  such  member  offering  to  sell,  or  the 
seller,  shall   be  compelled  to  sell  any  or  all  of   the 
smaller  lots  which  were  publicly  bid  for  at  the  time, 
at  the  higher  price,  up  to  the  amount  of  the  offer  of 
the  larger  lot.     If  the  offer  of  the  larger  lot  is  accepted, 
and  the  seller  is  unwilling  to  sell  more,  the  buyer  must 
give  up  to  the  members  who  were  publicly  bidding  the 
higher  price,  such  amounts  as  they  were  publicly  bidding 
for,  at  the  higher  price,  if  such  claim  is  made  immediately. 

5.  A  member  may  sell  on  offer  the  largest  amount 
bid  for  without  regard  to  priority  of  bids.     Should  the 

177 


STOCK  EXCHANGE  LAWS 

offer  be  of  an  amount  larger  than  the  largest  bid,  the 
balance  shall  go  to  the  next  largest  bidder  in  sequence; 
bids  for  equal  amounts  being  on  a  par. 
A  member  may  buy  on  bids  under  the  same  rule. 

6.  Attention  is   directed   to   the   resolution  of   the 
Governing  Committee  adopted  October  26,  1892,  which 
reads  as  follows : 

"When  a  purchase  or  sale  is  claimed  by  a  party  who 
states  that  he  had  on  the  floor  a  prior  or  better  bid  or 
offer  such  claim  shall  not  be  sustained  if  the  bid  or  offer 
was  not  made  with  the  publicity  and  frequency  neces- 
sary to  make  the  existence  of  such  bid  or  offer  generally 
known  at  the  time  of  the  transaction." 

7.  Disputes  arising  from  a  question  as  to  priority  of 
bid  or  offer,  if  not  settled  by  agreement  between  the 
members  interested,  shall  be  settled  by  vote  of  the  mem- 
bers knowing  of  the  transaction  in  question. 

Disputes  as  to  the  application  of  rules  relating  to  the 
transaction  in  question,  if  not  settled  by  agreement  be- 
tween the  members  interested,  shall  be  settled  by  any 
member  of  the  Committee  of  Arrangements. 

8.  The  above  rules  shall  not  apply  to  lots  of  less  than 
100  shares,  nor  to  active  openings  when  bids  and  offers 
are  simultaneous. 

Members  Dealing  with  Themselves  —  Specialists. 

MARCH  30,  1910. 
(To  take  effect  April  4,  1910.) 

"Resolved,  That  any  member  of  the  Exchange  who, 
while  acting  as  a  broker,  either  as  a  'Specialist'  or 

178 


CONSTITUTION,  BY-LAWS  AND  RULES 

otherwise,  shall  buy  or  sell  directly  or  indirectly  for  his 
own  account,  for  account  of  a  partner,  or  for  any  ac- 
count in  which  he  has  an  interest,  the  securities,  the 
order  for  the  purchase  or  sale  of  which  has  been  accepted 
by  him  for  execution,  shall  be  deemed  guilty  of  conduct 
or  proceeding  inconsistent  with  just  and  equitable  prin- 
ciples of  trade,  and  shall  be  subject  to  the  penalties  pro- 
vided in  Article  XVII,  Section  6,  of  the  Constitution. 

"The  foregoing  rule  shall  not  apply  to  the  act  of  a 
member  who  by  reason  of  his  neglect  to  execute  an  order 
is  compelled  to  take  or  to  supply  on  his  own  account  the 
securities  named  in  the  order;  in  such  case  the  member 
is  not  acting  as  a  broker  and  shall  not  charge  a  com- 
mission. 

"A  member,  acting  as  a  broker,  is  permitted  to  re- 
port to  his  principal  a  transaction  as  made  with  himself, 
only  when  he  has  orders  both  to  buy  and  to  sell  and 
not  to  give  up,  and  then  he  must  add  to  his  name  on  the 
report,  'on  order,'  or  words  to  that  effect." 

Bucket-shops. 

MAY  19,  1909. 

"That  any  member  of  this  Exchange  who  is  interested 
in,  or  associated  in  business  with,  or  whose  office  is  con- 
nected, directly  or  indirectly,  by  public  or  private  wire 
or  other  method  or  contrivance  with,  or  who  transacts 
any  business  directly  or  indirectly  with  or  for,  any  or- 
ganization, firm  or  individual  engaged  in  the  business 
of  dealing  in  differences  or  quotations  (commonly  called 
a  bucket-shop)  shall,  on  conviction  thereof,  be  deemed 

179 


STOCK  EXCHANGE  LAWS 

to  have  committed  an  act  or  acts  detrimental  to  the 
interest  and  welfare  of  this  Exchange." 

Clearing  Charges. 

NOVEMBER  23,  1881. 

"That  in  transactions  where  orders  are  received  from 
a  non-member,  wherein  the  broker  filling  the  order  is 
directed  to  give  up  another  broker  or  clearing-house,  the 
responsibility  of  collecting  the  full  commission  of  one- 
eighth  per  cent,  shall  rest  with  the  broker  or  clearing- 
house settling  the  transaction." 

OCTOBER  24,  1894. 

"That  in  transactions  where  orders  are  received  from 
a  member,  on  which  a  clearing  firm  is  given  up  by  said 
member  or  by  his  order,  the  responsibility  of  collecting 
the  full  commission  of  one-thirty-second  of  one  per  cent, 
shall  rest  with  said  clearing  firm;  and  it  shall  be  the 
duty  of  the  broker  who  executes  such  orders  to  report 
the  transactions  to  the  clearing  firm  and  render  to  them 
and  collect  his  bill  therefor  at  the  rate  of  one-fiftieth  of 
one  per  cent.;  and  also  that  where  a  broker  executes  an 
order  for  a  member  and  clears  the  security  himself,  he 
must  charge  one- thirty-second  of  one  per  cent." 

DECEMBER  28,  1911. 

"That  hereafter  when  a  member  of  the  Exchange  re- 
ceives and  delivers  securities  for  another  member,  the 
clearing  charge  for  said  service  may  be  a  matter  of 
mutual  agreement." 

180 


CONSTITUTION,  BY-LAWS  AND  RULES 

JANUARY  24,  1912. 

"That  the  Governing  Committee  rules  that  in  the 
matter  of  clearing  charges  between  members  of  the 
Exchange,  said  charges  shall  be  based  upon  a  stipulated 
sum  of  money  for  each  one  hundred  shares  of  stock  or 
ten  thousand  dollars  of  bonds,  or  portions  thereof. 

"The  payment  of  a  certain  sum  of  money  for  any 
period  of  time  for  said  service,  irrespective  of  the  num- 
ber of  shares  or  amount  of  bonds  cleared,  is  forbidden." 

Clerks  in  Nominal  Positions. 

JANUARY  23,  1901. 

"That  the  employment  of  a  clerk  or  clerks  in  a 
nominal  position  because  of  the  business  obtained  by 
such  clerk  or  clerks  for  their  employer,  is  a  violation 
of  the  rules."  Articles  XXXIV  and  XXXV  of  the  Con- 
stitution. 

Clerks,  Speculative  Transactions  for. 

MARCH  30,  1910. 
(To  take  effect  April  4,  1910.) 

"That  the  taking  or  carrying  of  a  speculative  account, 
or  the  making  of  a  speculative  transaction,  in  which  a 
clerk  of  the  Exchange,  or  of  a  member  of  the  Exchange, 
or  of  a  bank,  trust  company,  banker  or  insurance  com- 
pany, is  directly  or  indirectly  interested,  unless  the 
written  consent  of  the  employer  has  been  first  obtained, 
shall  be  deemed  an  act  detrimental  to  the  interest  and 
welfare  of  the  Exchange. 

181 


STOCK  EXCHANGE  LAWS 

Responsibility  for  Accounts  —  Fictitious 
Names,  etc. 

"That  every  member  of  the  Exchange  be  required  to 
use  due  diligence  to  learn  the  essential  facts  relating  to 
every  account  accepted  by  himself  or  by  his  clerks  or 
representatives,  and  also  relating  to  the  possible  use 
of  a  name  for  the  account  other  than  that  of  the  party 
interested." 

Commissions. 


Reciprocal  Business. 

APRIL  14,  1897. 

"That  transacting  or  offering  to  transact  business  in 
grain,  produce,  cotton  or  other  commodities,  without 
commission,  or  for  a  nominal  commission,  by  any  mem- 
ber of  this  Exchange  or  firm  represented  therein,  for  a 
customer  dealing  in  securities  dealt  in  at  the  Exchange, 
is  a  method  or  arrangement  for  rebatement  of  commis- 
sions, and  is  a  violation  of  the  commission  law. 

"That  giving  or  offering  to  give  reciprocal  business 
in  grain,  produce,  cotton  or  other  commodities  depend- 
ent upon  the  amount  of  Stock  Exchange  business  re- 
ceived is  a  method  or  arrangement  for  rebatement  of 
commissions  and  is  a  violation  of  the  commission  law." 

Commission  on  Mining  Shares. 

APRIL  13,  1910. 

"That  the  rates  of  commission  on  mining  shares  shall 
be  based  upon  selling  price,  regardless  of  par  value,  and 

182 


CONSTITUTION,  BY-LAWS  AND  RULES 

shall  not  be  less  than  the  following,  for  each  one  hundred 

shares  : 

For  Non-  For  Members,  For  Members, 

Selling  at                                Members.  if  cleared,  if  given  up. 

$10  and  above,                          $12.50  $3.12^  $2.00 

Below  $10,                                    6.25  i-S6)i  i.oo 


Taking  Over  or  Accepting  Transactions. 

APRIL  12,  1911. 

"Whenever  a  non-member  of  this  Exchange  shall 
cause  to  be  executed  in  any  market  outside  of  the  United 
States  any  order  or  orders  for  the  purchase  or  sale  of 
securities  listed  on  this  Exchange,  other  than  Govern- 
ment, State  or  Municipal  securities,  and  said  purchase 
or  sale  shall  be  accepted  by  a  member  or  a  firm  who  are 
members  of  this  Exchange,  for  the  account  of  said  non- 
member,  one-eighth  of  one  per  cent,  commission  shall 
be  charged  said  non-member  in  addition  to  any  com- 
mission charged  by  the  party  or  parties  making  the 
transaction." 

Commissions. 
(Bunched  Orders.} 

JUNE  12,  1912. 

The  Committee  on  Commissions  reported  to  the 
Governing  Committee  that  complaint  had  been  made 
that  a  custom  prevails  upon  the  Floor  of  what  is  called 
"  bunched"  orders  —  that  is,  when  one  member  has 
300  shares  of  stock  to  sell,  another  200  and  another  500, 
they  "bunch"  the  lots,  one  of  said  members  offering  the 

183 


STOCK  EXCHANGE  LAWS 

entire  lot  of  1,000  shares;  if  he  succeeds  in  disposing  of 
said  lot,  it  is  not  the  custom  for  him  to  charge  his  asso- 
ciates in  the  sale  any  commission. 

The  Committee  on  Commissions  expressed  the  opin- 
ion that  such  an  arrangement  or  custom  is  contrary  to 
the  commission  law  and  should  not  be  permitted,  and 
asked  the  confirmation  of  said  opinion  by  the  Governing 
Committee. 

On  motion,  said  opinion  was  confirmed. 

Commission  on  Government  Securities. 

JUNE  12,  1907. 

"That  the  Commission  Law,  in  Subdivision  d,  Sec- 
tion 2,  Article  XXXIV,  of  the  Constitution,  which  reads 
as  follows : 

l"  Government  and  Municipal  Securities  are  exempted 
from  the  provisions  of  this  article,'  refers  only  to  se- 
curities of  the  United  States,  Porto  Rico,  or  the  Philip- 
pine Islands,  and  of  States  and  Municipalities  there- 
in." 

Comparisons. 

NOVEMBER  9,  1904 

"That  when  a  mistake  in  comparison  is  made,  eithei 
by  a  member  in  person  or  by  his  clerks,  thereby  caus- 
ing a  loss  to  another  member,  or  when  a  failure  to 
promptly  fulfill  the  duties  imposed  by  the  comparison 
law  causes  a  loss  to  another  member,  the  member  sus- 
taining the  loss  may  bring  a  suit  before  the  Arbitra- 
tion Committee,  joining  as  defendants,  if  he  so  elects, 

184 


CONSTITUTION,  BY-LAWS  AND  RULES 

any  or  all  of  the  parties  concerned,  and  the  Arbitra- 
tion Committee  may  render  such  verdict  against  any  or 
all  of  the  defendants  as  the  facts  in  the  case  may 
warrant." 

Interest. 

MARCH  26,  1902. 

"That  any  agreement  or  arrangement  entered  into 
between  a  member  or  his  firm,  and  his  or  their  customer, 
whereby  special  and  unusual  rates  of  interest  are  stip- 
ulated for,  or  money-advances  upon  unusual  terms  are 
made  a  condition,  in  connection  with  the  conducting  of 
an  account,  with  intent  thereby  to  give  special  or  un- 
usual advantages  to  such  customer,  for  the  purpose  of 
securing  his  business,  shall  be  deemed  to  be  a  violation 
of  Article  XXXIV  of  the  Constitution,  commonly  known 
as  the  Commission  Law." 

Money  Loans  —  Interest. 

OCTOBER  25,  1899. 

"When  a  member  has  contracted  to  borrow  money  on 
collateral,  the  simple  payment  of  the  interest  by  the 
borrower  to  the  lender,  after  three  o'clock  p.  M.,  without 
actually  effecting  or  properly  endeavoring  to  effect  a 
loan,  shall  be  held  to  be  an  evasion  of  the  contract  and 
an  act  detrimental  to  the  interest  and  welfare  of  the 
Exchange,  and  the  offending  member  may  be  proceeded 
against  under  Section  8,  Article  XVII,  of  the  Con- 
stitution." 


STOCK  EXCHANGE  LAWS 

Stamp  Tax. 

MAY  24,  1905. 

"That  in  the  judgment  of  the  Governing  Committee 
any  member  of  the  Exchange  who,  by  agreement  or 
otherwise,  directly  or  indirectly,  assumes  or  bears  for 
his  own  account,  or  relieves  his  principal  from  any  part 
of  the  Stamp  Tax  imposed  by  the  Act  of  the  Legislature 
of  the  State  of  New  York,  approved  April  19,  1905,  is 
guilty  of  a  violation  of  Article  XXXIV  of  the  Consti- 
tution relating  to  commissions. 

Failure  to  Affix  Stamps. 

NOVEMBER  9,  1910. 

"The  Governing  Committee  calls  the  attention  of 
members  to  the  following  resolution  adopted  on  May 
26,  1905: 

"  'In  order  to  constitute  a  good  delivery  after  June  i, 
1905,  all  deliveries  on  sales  of  stock,  whether  by  Clear- 
ing-House delivery  ticket  or  by  certificate  of  stock, 
must  be  accompanied  by  a  sales  ticket  stamped  in 
accordance  with  the  Act  of  the  Legislature  of  the  State 
of  New  York,  adopted  April  19,  1905,  providing  for  a 
Tax  on  Transfers  of  Stock.' 

"Any  wilful  failure  on  the  part  of  a  member  to  affix 
the  stamps  required  by  Article  XII  of  the  Tax  Law  re- 
lating to  the  Tax  on  Transfers  or  Sales  of  Stock,  will  be 
deemed  by  the  Governing  Committee  an  act  detrimental 
to  the  interest  and  welfare  of  the  Exchange.' 

186 


CONSTITUTION,  BY-LAWS  AND  RULES 

Stock  List. 

MARCH  27,  1895. 

"Whenever  it  shall  appear  to  the  Committee  on 
Stock  List  that  the  outstanding  amount  of  any  secur- 
ity listed  upon  the  Stock  Exchange  has  become  so  re- 
duced as  to  make  inadvisable  further  dealings  therein 
upon  the  Exchange,  the  said  Committee  may  direct  that 
such  security  shall  be  taken  from  the  list  and  further 
dealings  therein  prohibited." 

Telephones. 

NOVEMBER  8,  1911. 

"That  the  resolution  adopted  by  the  Governing  Com- 
mittee on  March  28,  1900,  be  amended  by  striking  out 
the  words  'Sec.  8,'  and  inserting  in  lieu  thereof  the  words 
'Sec.  10,'  so  that  said  resolution  as  amended  shall  read 
as  follows,  viz.: 

"Resolved,  That  the  privilege  of  telephonic  communi- 
cation between  the  offices  of  members  and  the  building 
of  the  New  York  Stock  Exchange  shall  not  be  enjoyed 
as  of  right  but  shall  rest  in  the  discretion  of  the  Com- 
mittee of  Arrangements  or  the  Governing  Committee, 
and  that  the  Committee  of  Arrangements  shall  have 
power  in  their  discretion,  at  any  time,  and  from  time  to 
time,  to  withhold  such  privilege  from  any  member,  and 
to  disconnect,  or  cause  to  be  disconnected,  any  private 
telephone  in  the  Stock  Exchange  building.  Said  Com- 
mittee shall  also  have  power  in  their  discretion,  at  any 
time,  and  from  time  to  time,  to  deprive  any  member  of 

187 


STOCK  EXCHANGE  LAWS 

the  privilege  of  using  any  public  telephone  in  the  Stock 
Exchange  building;  said  Committee  shall  not  be  obliged 
to  assign  any  reason  or  cause  for  any  action  taken  by 
them  under  this  resolution. 

"Any  member  aggrieved  by  any  decision  of  the  Com- 
mittee of  Arrangements  under  this  resolution  shall  have 
the  right  to  appeal  therefrom  to  the  Governing  Commit- 
tee, and  to  appear  in  person  before  the  Governing  Com- 
mittee to  be  heard  upon  such  appeal. 

"No  such  appeal  shall  suspend  the  operation  of  the 
decision  appealed  from. 

"Every  decision  of  the  Committee  of  Arrangements 
by  which  the  privilege  of  telephonic  communication 
with  the  Stock  Exchange  building  shall  be  withheld  from 
any  member,  pursuant  to  this  resolution,  shall  be  im- 
mediately posted  upon  the  bulletin  board  in  the  Ex- 
change, and  every  member  of  the  Exchange  shall  be 
deemed  to  have  notice  thereof.  If  after  any  such 
notice  shall  have  been  posted,  any  member  of  the  Stock 
Exchange  shall  furnish  to  the  member  named  therein,  or 
to  his  partner  or  firm  or  office  any  facilities  for  com- 
munication between  the  office  of  such  member  and  the 
Stock  Exchange  building,  or  between  the  office  of  the 
member  named  in  such  notice  and  the  office  of  any  other 
member  of  the  Exchange  by  means  of  private  wire, 
telephone  or  any  electric  or  other  device,  contrivance  or 
apparatus,  he  may  be  suspended  by  the  Governing  Com- 
mittee for  a  period  not  exceeding  two  months,  pursu- 
ant to  the  provisions  of  Sec.  10  Article  XVII  of  the 
Constitution  of  the  Exchange." 

188 


CONSTITUTION,  BY-LAWS  AND  RULES 
Telephone  or  Telegraph  Connections. 

MAY  9,  1900. 

(To  take  effect  on  June  i,  1900.) 

"First.  —  That  hereafter  no  member  of  the  Stock 
Exchange  and  no  firm  of  which  such  member  is  a  part- 
ner, shall  establish  telephonic  or  telegraphic  wire  con- 
nection between  the  office  of  such  member  or  firm  and 
the  office  of  any  firm  or  individual  not  a  member  of 
the  Stock  Exchange  transacting  a  banking  or  brokerage 
business,  unless  application  therefor  shall  first  be  made 
to  the  Committee  of  Arrangements,  and  shall  have  been 
approved  by  them. 

"  Second.  —  Every  such  telephonic  or  telegraphic  wire 
connection  which  shall  be  so  authorized  by  the  Com- 
mittee of  Arrangements,  as  well  as  all  existing  tele- 
phonic or  telegraphic  wire  connections  of  the  same 
character,  shall  be  registered  with  the  Committee  of 
Arrangements,  who  shall  make  such  regulations  gov- 
erning the  matter  as  they  shall  deem  necessary. 

"  Third.  —  That  the  Committee  of  Arrangements 
shall  have  power,  at  any  time,  in  their  discretion,  to 
order  any  connection  of  the  character  described  in  these 
resolutions  to  be  discontinued. 

"Fourth.  —  While  members  of  the  Stock  Exchange 
may  connect  their  offices  by  wire  with  the  offices  of 
non-members,  in  accordance  with  the  provisions  of 
these  resolutions,  and  pay  for  such  wire  connection, 
nevertheless  no  such  member  shall  directly  or  indirectly, 
by  himself  or  through  his  firm,  pay  the  cost  of  telegraph 

189 


STOCK  EXCHANGE  LAWS 

operators  or  any  other  expense  pertaining  to  non- 
members'  offices. 

"Fifth.  —  No  office  in  the  City  of  New  York  of  any 
member  of  the  Stock  Exchange,  or  of  any  firm  of  which 
such  member  is  a  partner,  shall  be  connected  by  tele- 
graphic or  telephonic  wire  with  any  point  outside  of 
the  City  of  New  York  unless  such  wire  shall  be  furnished 
by  a  telegraph  or  telephone  company  approved  by  the 
Committee  of  Arrangements.  Said  Committee  shall 
from  time  to  time  formulate  a  list  of  such  approved  com- 
panies. 

" Sixth. — Any  member  violating  any  provision  of 
these  resolutions,  or  any  regulation  made  by  the  Com- 
mittee of  Arrangements  in  pursuance  thereof,  shall  be 
deemed  to  be  guilty  of  an  act  detrimental  to  the  interest 
and  welfare  of  the  Exchange." 

Privileges. 

FEBRUARY  14,  1912. 

"When  securities  are  received  or  delivered  on  a  priv- 
ilege for  a  non-member,  one-eighth  of  one  per  cent, 
commission  must  be  charged  whether  said  securities 
are  received  or  delivered  upon  the  day  of  expiration 
of  said  privilege  or  prior  thereto." 

Margins  —  Improper    Use   of   Customers'   Securities  — 
Reckless  and  Unbusinesslike  Dealing. 

FEBRUARY  13,  1913. 

"That  the  acceptance  and  carrying  of  an  account  for 
a  customer,  either  a  member  or  a  non-member,  without 

190 


CONSTITUTION,  BY-LAWS  AND  RULES 

proper  and  adequate  margin  may  constitute  an  act 
detrimental  to  the  interest  and  welfare  of  the  Exchange, 
and  the  offending  member  may  be  proceeded  against 
under  Section  8  of  Article  XVII  of  the  Constitution. 

"That  the  improper  use  of  a  customer's  securities 
by  a  member  or  his  firm,  is  an  act  not  in  accordance  with 
just  and  equitable  principles  of  trade,  and  the  offending 
member  shall  be  subject  to  the  penalties  provided  in 
Section  6  of  Article  XVII  of  the  Constitution. 

"That  reckless  or  unbusinesslike  dealing  is  contrary 
to  just  and  equitable  principles  of  trade,  and  the  offend- 
ing member  shall  be  subject  to  the  penalties  provided 
in  Section  6  of  Article  XVII  of  the  Constitution,  in 
every  case  in  which  the  offense  does  not  come  within 
the  provisions  of  Section  5  of  Article  XVI  thereof." 

Sales  With  no  Change  of  Ownership. 

FEBRUARY  5,  1913. 

Resolved,  That  no  Stock  Exchange  Member,  or 
member  of  a  stock  Exchange  firm  shall  give,  or  with 
knowledge  execute,  orders  for  the  purchase  or  sale  of 
securities  which  would  involve  no  change  of  ownership. 
The  punishment  for  this  offense  shall  be  as  prescribed 
in  Section  8  of  Article  XXIII  of  the  Constitution  re- 
garding fictitious  transactions. 


IQI 


PART  V 


PART  V 


Penal  Law 

(L.  1909.  chap.  88.  Consol.  Laws,  chap.  40.) 
SEC.  295.  Receiving  deposits  in  insolvent  bank. — An 
officer,  agent,  teller  or  clerk  of  any  bank,  banking  associa- 
tion or  savings  bank,  and  every  individual  banker  or 
agent,  and  every  private  banker  or  agent  and  any  teller 
or  clerk  of  an  individual  banker,  or  of  a  private  banker 
who  receives  any  deposit,  knowing  that  such  bank  or 
association  or  banker  is  insolvent,  is  guilty  of  a  mis- 
demeanor, if  the  amount  or  value  of  such  deposit  be 
less  than  twenty-five  dollars;  if  the  amount  or  value  of 
such  deposit  be  twenty-five  dollars  or  over,  such  person 
shall  be  guilty  of  a  felony,  punishable  by  imprisonment 
for  not  less  than  one  nor  more  than  five  years  or  by  a 
fine  of  not  less  than  five  hundred  nor  more  than  three 
thousand  dollars,  or  by  both. 

Source. — Penal  Code,  Sec.  601,  as  amended  by  L.  1902, 
ch.  148. 

Application  of  section.  —  Cragie  v.  Hadley,  99  N.  Y. 
131  (1885) ;  Atkinson  v.  Rochester  Printing  Co.  114  N.  Y. 
175  (1889) ;  Hall  v.  Baker,  66  App.  Div.  131, 135,  72  N.  Y 
Supp.  965  (1901). 


STOCK  EXCHANGE  LAWS 

Guilty  knowledge  must  be  shown  on  the  part  of  the 
officers.  Stapelton  v.  O'Dell,  21  Misc.  94,  47  N.  Y. 
Supp.  13  (1897).  The  fact  that  the  state  superintendent 
of  banks  had  closed  the  bank  does  not  tend  to  prove  such 
guilty  knowledge.  The  condition  of  the  bank,  whether 
solvent  or  not,  is  yet  undetermined.  People  v.  St. 
Nicholas  Bank,  7  7  Hun,  159,166, 28N.Y.  Supp.  407  (1894). 

Admission  of  unproved  paper  on  the  trial  of  an  indict- 
ment under  this  section  may  be  reversible  error.  People 
v.  Severance,  67  Hun,  182,  22  N.  Y.  Supp.  91  (1893). 

(L.  1909,  chap.  88.  Consol.  Laws  1909,  chap.  40.) 
SEC.  298.     Misconduct  by  banks  and  bankers.  —  Any 
moneyed  corporation  or  individual  banker  authorized 
to  carry  on  the  business  of  banking  under  the  laws  of 
this  state,  who: 

1.  Receives,  pays  out,  gives  or  offers  in  payment  as 
money  to  circulate,  or  who  attempts  to  circulate  as  money, 
any  bill,  note  or  other  evidence  of  debt  issued  or  pur- 
porting to  have   been    issued   by  any  corporation    or 
individual,  situated  or  residing  without  this  state,  and 
which  bill,  note  or  other  evidence  of  debt  shall,  upon 
any  part  thereof,  purport  to  be  payable  or  redeemable  at 
any  place  or  by  any  corporation  or  individual    within 
this  state;  or, 

2.  Issues,   utters,  or  circulates,  as  money,  or  in  any 
way,  directly  or  indirectly,  aids  or  assists  in  the  issuing, 
uttering  or  circulating  as  money  within  this  state,  of  any 
bank  bill,  note  or  other  evidence  of  debt  in  the  similitude 
of  a  bank  note  issued  or  purporting  to  have  been  issued 

196 


LAWS  RELATING  TO  STOCKBROKERS 

by  any  corporation  or  individual  situated  or  residing 
without  this  state;  or  procures  or  receives,  in  any  manner 
whatever,  any  such  bank  bill,  note  or  other  evidence  of 
debt  with  intent  to  issue,  utter  or  circulate,  or  with 
intent  to  aid  in  issuing,  uttering  or  circulating  the  same 
as  money  within  this  state;  or, 

3.  Directly  or  indirectly  lends  or  pays  out  for  paper 
discounted  or  purchased  any  bank  bill,  note  or  other 
evidence  of  debt,  which  is  not  received  at  par  by  such 
corporation  or  banker  for  debts  due  such  corporation  or 
banker;  or, 

4.  Issues  or  puts  in  circulation  any  bank  bill  or  note 
of  any  such  corporation  or  banker,  unless  the  same  shall 
be   made   payable   on   demand   and   without  interest, 
except  bills  of  exchange  on  foreign  countries  or  places 
beyond  the  limits  or  jurisdiction  of  the  United  States, 

Is  guilty  of  a  misdemeanor. 

Nothing  in  this  section  contained  shall  be  construed 
to  prohibit  any  such  corporation  or  banker  from  re- 
ceiving and  paying  out  such  foreign  bank  bills  as  they 
shall  receive  at  par  in  the  ordinary  course  of  their  busi- 
ness, or  to  prohibit  such  corporation  or  banker  from 
receiving  foreign  notes  from  their  dealers  and  customers 
in  the  regular  and  usual  course  of  their  business,  at  a 
rate  of  discount  not  exceeding  that  which  is  or  shall  be 
at  the  time  fixed  by  law,  for  the  redemption  of  the  bills 
of  the  banks  of  this  state  at  their  agencies,  or  from  obtain- 
ing from  the  corporations,  associations  or  individuals 
by  which  such  foreign  notes  are  made,  the  payment  or 
redemption  thereof. 

197 


STOCK  EXCHANGE  LAWS 

Source. — Penal  Code,  sec.  604,  as  amended  by  L. 
1892,  ch.  692,  Sec.  i. 

SEC.  299.  Unlawful  discount  of  bills  of  foreign  banks. — 
Any  person,  association  or  corporation  within  the  state 
who,  directly  or  indirectly,  on  any  pretense  whatever, 
procures  or  receives  or  offers  to  receive  from  any  cor- 
poration or  person  any  bank  bill  or  note  or  other  evidence 
of  debt  in  the  similitude  of  a  bank  note,  issued  or  pur- 
porting to  have  been  issued  by  any  corporation  or  in- 
dividual, situated  or  residing  without  this  state,  at  a 
greater  rate  of  discount  than  is  or  shall  be  at  the  time 
fixed  by  law,  for  the  redemption  of  the  bills  of  the  banks 
of  this  state  at  their  agencies,  is  guilty  of  a  misde- 
meanor. 

Source. —  Penal  Code,  sec.  605,  as  amended  by  L.  1892, 
ch.  692,  sec.  i. 

SEC.  302.  Unauthorized  use  of  the  term  "bank."  Any 
person  engaged  in  banking  in  this  state,  not  subject  to  the 
supervision  of  the  superintendent  of  banks,  and  not 
required  by  law  to  report  to  such  superintendent,  who 
was  not  engaged  in  such  banking  before  May  twenty- 
third,  eighteen  hundred  and  eighty-five,  who: 

1.  Uses  an  office  sign  at  the  place  where  such  business 
is  transacted,  having  thereon  any  artificial  or  corporate 
name,  or  other  words  indicating  that  such  place  or  office 
is  the  place  or  office  of  a  bank;  or, 

2.  Uses  or  circulates  any  letter-heads,  bill-heads,  blank 
notes,  blank  receipts,  certificates,  circulars  or  any  written 

198 


LAWS  RELATING  TO  STOCKBROKERS 

or  printed  paper  whatever,  having  thereon  any  artificial 
or  corporate  name,  or  other  word  or  words  indicating 
that  such  business  is  the  business  of  a  bank, 

Is  guilty  of  a  misdemeanor. 

Source.  —  Penal  Code,  Sec.  609,  as  amended  by  L. 
1892,  ch.  692,  Sec.  i. 

Application  of  section.  —  Hall  v.  Baker,  66  App.  Div. 
131,  72  N.  Y.,  Supp.  965  (1901). 

"Bucket-Shop"  Act. 

SEC.  390  Acts  prohibited;  penalty  for  violation.  Any 
person,  copartnership,  firm,  association  or  corporation 
whether  acting  in  his,  their  or  its  own  right,  or  as  the 
officer,  agent,  servant,  correspondent  or  representative 
of  another,  who  shall, 

1.  Make  or  offer  to  make,  or  assist  in  making   or 
offering  to  make  any  contract  respecting  the  purchase 
or  sale,  either  upon  credit  or  margin,  of  any  securities 
or  commodities,  including  all  evidences  of  debt  or  prop- 
erty and  options  for  the  purchase  thereof,  shares  in  any 
corporation  or  association,  bonds,  coupons,  scrip,  rights, 
choses  in  action  and  other  evidences  of  debt  or  property, 
and  options  for  the  purchase  thereof  or  anything  movable 
that  is  bought  and  sold,  intending  that  such  contract 
shall  be  terminated,  closed  or  settled  according  to,  or 
upon,  the  basis  of  the  public  market  quotations  of  prices 
made  on  any  board  of  trade  or  Exchange  upon  which 
such  commodities  or  securities  are  dealt  in,  and  with- 
out intending  a  bona  fide  purchase  or  sale  of  the  same;  or, 

2.  Makes  or  offers  to  make  or  assists  in  making  or  offer- 

199 


STOCK  EXCHANGE  LAWS 

ing  to  make  any  contract  respecting  the  purchase  or  sale, 
either  upon  credit  or  margin,  of  any  such  securities  or 
commodities  wherein  both  parties  intend  that  such 
contract  shall  be  deemed,  terminated,  closed  and  settled 
when  such  market  quotations  of  prices  for  such  securi- 
ties or  commodities  named  in  such  contract  shall  reach 
a  certain  figure,  without  intending  a  bona  fide  purchase 
or  sale  of  the  same;  or, 

3.  Makes  or  offers  to  make,  or  assists  in  making  or 
offering  to  make  any  contract  respecting  the  purchase  or 
sale,  either  upon  credit  or  margin,  of  any  such  securities 
or  commodities,  not  intending  the  actual  bona  fide  receipt 
or  delivery  of  such  securities  or  commodities,  but  intend- 
ing a  settlement  of  such  contract  based  upon  the  differ- 
ence in  such  public  market  quotations  of  prices  at  which 
said  securities  or  commodities  are,  or  are  asserted  to  be, 
bought  or  sold;  or, 

4.  Shall,  as  owner,  keeper,  proprietor  or  person  in 
charge  of,  or  as  officer,  director,  stockholder,  agent,  ser- 
vant, correspondent  or  representative  of  such  owner, 
keeper,  proprietor  or  person  in  charge,  or  of  any  other 
person,  keep,  conduct  or  operate   any  bucket-shop,  as 
hereinafter  defined;  or  knowingly  permit  or  allow  or 
induce  any  person,  co-partnership,  firm,  association  or 
corporation  whether  acting  in  his,  their  or  its  own  right, 
or  as  the  officer,  agent,  servant,  correspondent  or  rep- 
resentative of  another  to  make  or  offer  to  make  therein, 
or  in  offering  to  make  therein,  any  of  the  contracts  speci- 
fied in  any  of  the  three  preceding  subdivisions  of  this 
section. 

200 


LAWS  RELATING  TO  STOCKBROKERS 

Shall  be  guilty  of  a  felony  and  on  conviction  thereof 
shall,  if  a  corporation,  be  punished  by  a  fine  of  not  more 
than  five  thousand  dollars  for  each  offense,  and  all  other 
persons  so  convicted  shall  be  punished  by  a  fine  of  not 
more  than  one  thousand  dollars  or  by  imprisonment  for 
not  more  than  five  years,  or  by  both  such  fine  and  im- 
prisonment. The  prosecution,  conviction  and  punish- 
ment of  a  corporation  hereunder  shall  not  be  deemed  to 
be  a  prosecution,  conviction  or  punishment  of  any  of  its 
officers,  directors  or  stockholders. 

(Amendedby  Laws  1913, ch.  236.  In  effect  April  9, 19 13.) 

SEC.  391.  Exhibiting  quotations;  penalty  for  violation. 
Any  person,  firm,  copartnership,  association  or  corporation 
receiving,  communicating,  exhibiting  or  displaying  in  any 
manner  any  statement  of  quotations  of  prices  of  any  such 
securities  or  commodities  with  an  intent  to  make  or  offer 
to  make  or  to  assist  in  making  or  offering  to  make  any  con- 
tract prohibited  in  this  article  shall  be  guilty  of  a  felony 
and  on  conviction  thereof  shall  be  punished  as  provided 
in  section  three  hundred  and  ninety  of  this  chapter. 

Source.  —  Penal  Code,  sec.  355-b,  as  added  by  L. 
1908,  ch.  458. 

SEC.  392.  Written  statement  to  be  furnished;  pre- 
sumption. Every  person,  firm,  association,  copartner- 
ship or  corporation  shall  furnish  upon  written  demand 
to  any  customer,  or  principal  for  whom  such  person  has 
executed  an  order  for  the  actual  purchase  or  sale  of  any 
such  securities  or  commodities,  either  for  immediate 

201 


STOCK  EXCHANGE  LAWS 

or  future  delivery,  a  written  statement  containing  the 
names  of  the  persons  from  whom  such  property  was 
bought,  or  to  whom  it  has  been  sold,  as  the  case  may  be, 
the  time  when,  place  where,  the  amount  of  and  the  price 
at  which  the  same  was  either  bought  or  sold ;  and  if  such 
person,  firm,  association,  copartnership  or  corporation 
shall  refuse  or  neglect  to  furnish  such  statement  within 
forty-eight  hours  after  such  demand,  such  refusal  shall 
be  prima  facie  evidence  that  such  purchase  or  sale  was 
made  in  violation  of  this  article. 

Source.  —  Penal  Code,  sec.  355-c,  as  added  by  L. 
1908,  ch.  458. 

SEC.  393.  Corporations;  additional  penalty  for  second 
offense.  If  a  domestic  corporation  shall  be  convicted 
of  a  second  offense  hereunder  the  supreme  court  shall 
have  jurisdiction  upon  an  action  brought  by  the  attor- 
ney-general, in  the  name  of  the  people,  for  that  purpose, 
to  dissolve  such  corporation ;  and  if  a  foreign  corporation 
shall  be  convicted  of  a  second  offense,  such  court  shall 
have  jurisdiction  in  an  action  brought  in  like  manner  to 
restrain  such  corporation  from  doing  business  in  this 
state. 

Source. —  Penal  Code,  sec.  355-d,  as  added  by  L.  1908, 
ch.  458. 

SEC.  394.  Definitions.  "Bucket-shop"  shall  mean 
any  building,  or  any  room,  apartment,  booth,  office 
or  store  therein  or  any  other  place  where  any  contract 
prohibited  by  this  article  is  made  or  offered  to  be  made. 

202 


LAWS  RELATING  TO  STOCKBROKERS 

Source  —  Penal  Code,  sec.  355-6,  as  added  by  L.  1908, 
ch.  458. 

SEC.  444.  Discriminations  by  Exchanges  or  Members. 
No  exchange,  voluntary  association,  or  corporation, 
heretofore  or  hereafter  formed  or  organized,  for  the 
purpose  of  affording  to  its  members,  or  to  others,  facili- 
ties for  dealing  or  trading  in  stocks,  bonds,  or  other 
securities,  or  in  commodities,  shall  make  or  enforce  any 
by-law,  rule,  regulation,  resolution  or  agreement  the 
purpose  or  result  of  which  shall  be  to  forbid  or  prevent 
the  members  of  such  exchange,  voluntary  association, 
or  corporation,  from  dealing,  at  the  regular  rates  of 
commission  with  or  for  the  members  of  any  other  ex- 
change, voluntary  association,  or  corporation  formed  or 
organized  for  like  purposes,  nor  shall  any  such  exchange, 
voluntary  association,  or  corporation,  penalize  or  dis- 
cipline or  attempt  to  penalize  or  discipline  its  members 
or  any  of  them,  for  an  infraction  of  any  such  by-law,  rule, 
regulation,  resolution  or  agreement.  Any  corporation 
violating  any  of  the  foregoing  provisions,  and  any  person 
participating  in  the  acts  herein  forbidden  to  be  done  by 
any  exchange,  voluntary  association,  or  corporation, 
and  any  member  of  any  such  exchange,  voluntary  asso- 
ciation, or  corporation  refusing  to  deal  with  or  for  any 
customer  as  above  provided,  on  the  ground  that  said 
customer  is  a  member  of  some  other  Exchange,  voluntary 
association,  or  corporation  of  like  character,  is  guilty  of  a 
misdemeanor. 

(Added  by  Laws  1913,  ch.  477.  In  effect  Sept.  i,  1913.) 

203 


STOCK  EXCHANGE  LAWS 

(L.  1909,  chap.  88.     Consol.  Laws  1909,  chap.  40.) 
SEC.  660.    Frauds  in  the  organization  of  corporations. 
— A  person  who: 

1.  Without  authority  subscribes  the  names  of  another 
to  or  inserts  the  name  of  another  in  any  prospectus, 
circular  or  other  advertisement  or  announcement  of  any 
corporation  or  joint-stock   association   existing   or  in- 
tended to  be  formed,  with  intent  to  permit  the  same  to  be 
published,  and  thereby  to  lead  persons  to  believe  that 
the  person  whose  name  is  so  subscribed  is  an  officer, 
agent,   member   or   promoter   of   such   corporation   or 
association;  or, 

2.  Signs  the  name  of  a  fictitious  person  to  any  sub- 
scription for  or  agreement  to  take  stock  in  any  corpora- 
tion, existing  or  proposed ;  or, 

3.  Signs  to  any  such  subscription  or  agreement  the 
name  of  any  person,  knowing  that  such  person  does  not 
intend  in  good  faith  to  comply  with  the  terms  thereof, 
or  under  any  understanding  or  agreement,   that  the 
terms  of  such  subscription  or  agreement  are  not  to  be 
complied  with  or  enforced, 

Is  guilty  of  a  misdemeanor. 

Source.  —  Penal  Code,  sec.  590,  as  amended  by  L. 
1892,  sec.  i. 

SEC.  662.  Fraudulent  issue  of  stocks  and  bonds. — An 
officer,  agent,  or  other  person  in  the  service  of  any  joint- 
stock  company  or  corporation  formed  or  existing  under 
the  laws  of  this  state,  or  of  the  United  States  or  of  any 
state  or  territory  thereof,  or  of  any  foreign  government 

204 


LAWS  RELATING  TO  STOCKBROKERS 

or  country,  who  wilfully  and  knowingly  with  intent  to 
defraud; 

1.  Sells,  pledges  or  issues,  or  causes  to  be  sold,  pledged 
or  issued,  or  signs  or  executes,  or  causes  to  be  signed  or 
executed  with  intent  to  sell,  pledge  or  issue,  or  cause  to 
be  sold,  pledged  or  issued,  any  certificate  or  instrument 
purporting  to  be  a  certificate  or  evidence  of  the  owner- 
ship of  any  share  or  shares  of  such  company  or  corpora- 
tion or  any  bond  or  evidence  of  debt,  or  writing  purport- 
ing to  be  a  bond  or  evidence  of  debt  of  such  company  or 
corporation,  without  being  first  thereto  duly  authorized 
by  such  company  or  corporation,  or  contrary  to  the 
charter  or  laws  under  which  such  corporation  or  com- 
pany, exists,  or  in  excess  of  the  power  of  such  company  or 
corporation  or  of  the  limit  imposed  by  law  or  otherwise 
upon  its  power  to  create  or  issue  stock  or  evidences  of 
debt;  or, 

2.  Reissues,  sells,  pledges  or  disposes  of,  or  causes  to 
be  reissued,  sold,  pledged  or  disposed  of,  any  surrend- 
ered or  canceled  certificates,  or  other  evidence  of  the 
transfer  or  ownership  of  any  such  share  or  shares, 

Is  punishable  by  imprisonment  for  a  term  not  ex- 
ceeding seven  years,  or  by  a  fine  not  exceeding  three 
thousand  dollars,  or  by  both. 

Source.  —  Penal  Code,  sec.  591,  as  amended  by  L. 
1892,  ch.  662,  sec.  19. 

(L.  1909,  chap.  88.     Consol.  Laws  1909,  chap.  40.) 

SEC.  663.    Acting  for  foreign  corporations  not  auth- 

205 


STOCK  EXCHANGE  LAWS 

orized  to  do  business  in  this  state. — Any  person,  or  cor- 
poration, who: 

1.  Acts  as  agent  or  representative  of  any  mortgage, 
loan  or  investment  corporation  or  building  and  mutual 
loan  corporation  or  association  or  cooperative  savings  and 
loan  association  organized  outside  of  this  state,  while  such 
mortgage,  loan  or  investment  corporation  or  building  and 
mutual  loan  corporation  or  association  or  cooperative 
savings  and  loan  association  shall  not  be  authorized 
under  a  license  of  the  superintendent  of  banks  to  do 
business  in  this  state;  or, 

2.  Acts  as  agent  or  representative  in  this  state  of  a 
foreign  corporation,  other  than  a  moneyed  corporation, 
with  the  words  "  trust,"  "  bank,"  "banking,"  "insurance," 
"assurance,"   "indemnity,"    "guarantee,"    "guaranty," 
"savings,"    "investment,"    "loan,"   "benefit,"   or   any 
other  words  or  terms  indicating,  representing  or  holding 
out  such  company  to  be  a  moneyed  corporation  as  a 
part  of  its  name  or  corporate  title,  or  who,  in  connection 
with  such  corporation  or  otherwise,  shall  put  forth  any 
sign  containing  said  name,  or  who  shall  advertise  or 
publish  the  said  company  as  doing  business  in  this  state, 
directly  or  indirectly,  through  agents  or  otherwise,  while 
such  company  shall  not  be  authorized  under  a  certificate 
procured  from  the  secretary  of  state  pursuant  to  section 
fifteen  of  the  general  corporation  law  to  do  business,  in 
this  state, 

Is  guilty  of  a  misdemeanor. 

Source.  —  Penal  Code,  sec.  593,  as  amended  by  L.  1892, 
ch.  692,  sec.  i;  L.  1904,  ch.  489,  sec.  i;  L.  1908,  ch.  118. 

206 


LAWS  RELATING  TO  STOCKBROKERS 

SEC.  926.  False  rumors  as  to  stocks,  bonds  or  public 
funds. — A  person  who,  with  intent  to  affect  the  market 
price  of  the  public  funds  of  this  state  or  of  the  United 
States,  or  of  any  state  or  territory  thereof  or  of  a  foreign 
country  or  government,  or  of  the  stocks,  bonds,  or  other 
evidences  of  debt  of  a  corporation  or  association,  or  the 
market  price  of  gold  or  silver  coin  or  bullion,  or  any 
merchandise  or  commodity  whatever; 

1.  Without  lawful  authority,  falsely  signs  the  name  of 
an  officer  of  a  corporation,  or  of  any  other  person  to  a 
letter,  message,  or  other  paper:  or, 

2.  Utters  or  circulates  such  a  letter,  message,  or  paper, 
knowing  that  the  same  has  been  so  falsely  signed;  or, 

3.  Knowingly  circulates  any  false  statement,  rumor, 
or  intelligence, 

Is  punishable  by  a  fine  of  not  more  than  five  thousand 
dollars,  or  by  imprisonment  for  not  more  than  three 
years,  or  both. 

Source. —  Penal  Code,  sec.  435. 

Circulating  a  false  report  that  a  stock  corporation  is 
going  into  a  receiver's  hands  is  a  violation  of  this  action. 
People  v.  Goslin,  67  App.  Div.,  16;  73  N.  Y.,  Supp.  520 
(1901);  aff'd  171  N.  Y.  627. 

SEC.  951.  Reporting  or  publishing  fictitious  trans- 
actions in  securities. — A  person  who  with  intent  to 
deceive,  reports  or  publishes,  or  causes  to  be  reported 
or  published  as  a  purchase  or  sale  of  the  stocks,  bonds  or 
other  evidences  of  debt  of  a  corporation,  company  or 
association,  any  transaction  therein,  whereby  no  actual 

207 


change  of  ownership  or  interest  is  effected,  is  guilty  of  a 
felony,  punishable  by  a  fine  of  not  more  than  five  thou- 
sand dollars,  or  by  imprisonment  for  not  more  than  two 
years,  or  by  both. 

(Added  by  Laws  1915,  ch.  476.    In  effect  May  9, 1913.) 

SEC.  952.  False  statement  or  advertisement  as  to  se- 
curities. —  Any  person  who,  with  intent  to  deceive, 
makes,  issues  or  publishes,  or  causes  to  be  made,  issued 
or  published,  any  statement  or  advertisement  as  to  the 
value  or  as  to  facts  affecting  the  value  of  the  stocks, 
bonds  or  other  evidences  of  debt  of  a  corporation,  com- 
pany or  association,  or  to  facts  affecting  the  financial 
condition  of  any  corporation,  company  or  association 
which  has  issued,  is  issuing  or  is  about  to  issue  stocks, 
bonds  or  other  evidences  of  debt,  and  who  knows,  or  has 
reasonable  ground  to  believe  that  any  material  repre- 
sentation, prediction  or  promise  made  in  such  state- 
ment or  advertisement  is  false,  is  guilty  of  a  felony, 
punishable  by  a  fine  of  not  more  than  five  thousand 
dollars,  or  by  imprisonment  for  not  more  than  three 
years,  or  by  both. 
(Added  by  Laws  1913,  ch.  475.  In  effect  May  9,  1913.) 

SEC.  953.  Manipulation  of  prices  of  securities. — Any 
person  who  inflates,  depresses,  or  causes  fluctuations 
in,  or  attempts  to  inflate,  depress  or  cause  fluctuations  in, 
or  combines  or  conspires  with  any  other  person  or  persons 
to  inflate,  depress  or  cause  fluctuations  in,  the  market 
prices  of  the  stocks,  bonds  or  other  evidences  of  debt  of  a 

208 


LAWS  RELATING  TO  STOCKBROKERS 

corporation,  company  or  association,  or  of  an  issue  or  any 
part  of  an  issue  of  the  stock,  bonds  or  evidences  of  debt 
of  a  corporation,  company  or  association,  by  means  of 
pretended  purchases  and  sales  thereof,  or  by  any  other 
fictitious  transactions  of  devices  for  or  on  account  of 
such  person  or  of  any  other  person,  or  for  or  on  ac- 
count of  the  persons  so  combining  or  conspiring,  whereby 
either  in  whole  or  in  part  a  simultaneous  change  of  owner- 
ship of  or  interest  in  such  stocks,  bonds  or  evidences  of 
debt,  or  of  such  issue  or  part  of  an  issue  thereof,  is  not 
effected,  is  guilty  of  a  felony,  punishable  by  a  fine  of  not 
more  than  five  thousand  dollars  or  by  imprisonment  for 
not  more  than  two  years,  or  by  both. 

A  pretended  purchase  or  sale  of  any  such  stocks,  bonds 
or  other  evidences  of  debt  whereby,  in  whole  or  in  part, 
no  simultaneous  change  of  ownership  or  interest  therein 
is  effected,  shall  be  prima  facie  evidence  of  the  violation 
of  this  section  by  the  person  or  persons  taking  part  in  the 
transactions  of  such  pretended  purchase  or  sale. 

(Added  by  Laws  1913,  ch.  253.  In  effect  April  10, 1913.) 

SEC.  954.  Trading  by  brokers  against  customers'  orders. 
• — A  broker  who,  being  employed  by  a  customer  to  buy  and 
carry  upon  margin  the  stocks,  bonds  or  other  evidences 
of  debt  of  a  corporation,  company  or  association,  while 
acting  as  broker  for  such  customer  in  respect  of  such 
stocks,  bonds  or  other  evidences  of  debt,  sells  for  his  own 
account  the  same  kind  or  issue  of  stocks,  bonds  or  other 
evidences  of  debt  of  such  corporation,  company  or 
association,  with  intent  to  trade  against  the  customer's 

209 


STOCK  EXCHANGE  LAWS 

order,  or,  who,  being  employed  by  a  customer  to  sell  the 
stocks,  bonds  or  other  evidences  of  debt  of  a  corporation, 
company  or  association,  while  acting  as  broker  for  such 
customer  in  respect  to  the  sale  of  such  stocks,  bonds  or 
other  evidences  of  debt,  purchases  for  his  own  account 
the  same  kind  or  issue  of  stocks,  bonds  or  other  evidences 
of  debt  of  such  corporation,  company  or  association, 
with  intent  to  trade  against  the  customer's  order,  is 
guilty  of  a  felony,  punishable  by  a  fine  of  not  more  than 
five  thousand  dollars,  or  by  imprisonment  for  not  more 
than  one  year,  or  by  both.  Every  member  of  a  firm  of 
brokers,  who  either  does,  or  consents  or  assents  to  the 
doing  of  any  act  which  by  the  provisions  of  this  section 
is  made  a  felony,  shall  be  guilty  of  a  violation  there- 
of. 

(Added  by  Laws  1913,  ch.  592.     In  effect  May  17, 


SEC.  955.  Transactions  by  brokers  after  insolvency.  — 
A  person  engaged  in  the  business  of  purchasing  and 
selling  as  broker,  stocks,  bonds  or  other  evidences  of 
debt  of  corporations,  companies  or  associations  who, 
knowing  that  he  is  insolvent,  accepts  or  receives  from  a 
customer  ignorant  of  such  broker's  insolvency,  money, 
stocks,  bonds  or  other  evidences  of  debt  belonging  to  the 
customer  otherwise  than  in  liquidation  of,  or  as  security 
for,  an  existing  indebtedness,  and  who  thereby  causes 
the  customer  to  lose  in  whole  or  in  part  such  money, 
stocks,  bonds  or  other  evidences  of  debt,  is  guilty  of  a 
felony  punishable  by  fine  of  not  more  than  five  thou- 

210 


LAWS  RELATING  TO  STOCKBROKERS 

sand  dollars  or  by  imprisonment  for  not  more  than  two 
years,  or  by  both.  A  person  shall  be  deemed  insolvent 
within  the  meaning  of  this  section  whenever  the  aggre- 
gate of  his  property  shall  not,  at  a  fair  valuation,  be 
sufficient  in  amount  to  pay  his  debts. 

(Added  by  Laws  1913,  ch.  500.     In  effect  May  8, 


(L.  1909,  ch.  88.  Consol.  Laws  1909,  ch.  40.) 
SEC.  956.     Hypothecation  of  customer's  securities.  —  A 
person  engaged  in  the  business  of  purchasing  and  selling 
as  a  broker  stocks,  bonds  or  other  evidences  of  debt  of 
corporations,  companies  or  associations,  who, 

1.  Having  in  his  possession,  for  safe  keeping  or  other- 
wise, stocks,  bonds  or  other  evidences  of  debt  of  a  cor- 
poration, company  or  association  belonging  to  a  customer 
without  having  any  lien  thereon  or  any  special  property 
therein,  pledges  or  disposes  thereof  without  such  cus- 
tomer's consent  or, 

2.  Having  in  his  possession  stocks,  bonds  or  other 
evidences  of  debt  of  a  corporation,  company  or  associa- 
tion belonging  to  a  customer  on  which  he  has  a  lien  for 
indebtedness  due  to  him  by  the  customer, 

Pledges  the  same  for  more  than  the  amount  due  to  him 
thereon,  or  otherwise  disposes  thereof  for  his  own  benefit, 
without  the  customer's  consent,  and  without  having  in 
his  possession  or  subject  to  his  control,  stocks,  bonds  or 
other  evidences  of  debt  of  the  kind  and  amount  to  which 
the  customer  is  then  entitled,  for  delivery  to  him  upon 
his  demand  therefor  and  tender  of  the  amount  due  there- 

211 


STOCK  EXCHANGE  LAWS 

on,  and  thereby  causes  the  customer  to  lose,  in  whole  or  in 
part,  such  stocks,  bonds  or  other  evidences  of  debt, 
or  the  value  thereof,  is  guilty  of  a  felony,  punishable  by 
a  fine  of  not  more  than  five  thousand  dollars  or  by  im- 
prisonment for  not  more  than  two  years,  or  by  both. 

Every  member  of  a  firm  of  brokers,  who  either  does, 
or  consents  or  assents  to  the  doing  of  any  act  which  by 
the  provisions  of  this  or  the  last  preceding  section  is 
made  a  felony,  shall  be  guilty  thereof. 
(Added  by  Laws  1913,  ch.  500.     In  effect  May  8,  1913.) 

SEC.  957.  Delivery  to  customers  of  memoranda  of 
transactions  by  brokers.  A  person  engaged  in  the  business 
of  purchasing  or  selling  as  broker,  stocks,  bonds  and  other 
evidences  of  debt  of  corporations,  companies  or  associa- 
tions shall  deliver  to  each  customer  on  whose  behalf  a 
purchase  or  sale  of  such  securities  is  made  by  him  a  state- 
ment or  memorandum  of  such  purchase  or  sale,  a  descrip- 
tion of  the  securities  purchased  or  sold,  the  name  of  the 
person,  firm  or  corporation  from  whom  such  securities 
were  purchased,  or  to  which  the  same  were  sold,  and  the 
day,  and  the  hours  between  which  the  transactions  took 
place.  A  broker  who  refuses  to  deliver  such  statement 
or  memorandum  to  a  customer  within  twenty-four  hours 
after  a  written  demand  therefor,  or  who  delivers  a  state- 
ment or  memorandum  which  is  false  in  any  material  re- 
spect, is  guilty  of  a  misdemeanor,  punishable  by  a  fine 
of  not  more  than  five  hundred  dollars,  or  imprisonment 
for  not  more  than  one  year,  or  both. 

(Added  by  Laws,  1913,  ch.  593.  In  effect  Sept.  i,  1913.) 

212 


LAWS  RELATING  TO  STOCKBROKERS 
Personal  Property  Law 

(L.  1909,  chap  45.  Consol.  Laws  1909,  chap  41.) 
SEC.  33.  Validity  of  certain  agreements  made  without 
consideration.  An  agreement  for  the  purchase,  sale, 
transfer  or  delivery  of  a  certificate  or  other  evidence  of 
debt,  issued  by  the  United  States  or  by  any  state,  or  a 
municipal  or  other  corporation,  or  of  any  share  or  interest 
in  the  stock  of  any  bank  corporation  or  joint  stock  asso- 
ciation, incorporated  or  organized  under  the  laws  of  the 
United  States  or  of  any  state,  is  not  void  or  voidable, 
for  want  of  consideration,  or  because  of  the  non-pay- 
ment of  consideration,  or  because  the  vendor,  at  the 
time  of  making  such  contract,  is  not  the  owner  or  possessor 
of  the  certificate  or  certificates  or  other  evidence  of  debt, 
share  or  interest. 

Source.  Former  Pers.  Prop.  L.  (L.  1897,  ch.  417.) 
Sec.  22;  originally  revised  from  L.  1858,  ch.  134. 

For  rule  and  practice  prior  to  act  of  1858,  and  under 
the  Revised  Statutes,  see  Staples  v.  Gould,  9  N.  Y.  520 
(1854);  Washburn  v.  Franklin,  28  Barb.  27  (1858). 

ARTICLE  VI. 

(Laws  1909,  ch.  45  Consol.  Laws  1909,  ch.  41.) 
Transfers  of  Certificates  and  Shares  of  Stock. 

This  new  article  is  added  by  Laws  1913,  ch.  660. 

As  originally  enacted  the  Personal  Property  Law  con- 
tained five  articles.  By  Laws  191 1,  ch.  571,  a  new  article 
5  was  added,  and  the  original  article  5,  renumbered 
article  6,  which,  with  the  new  article  added  by  said 

213 


STOCK  EXCHANGE  LAWS 

Laws  1913,  ch.  600,  leaves  the  law  with  two  articles 
numbered  6. 

SEC.  162.  How  title  to  certificates  and  shares  may  be 
transferred.  Title  to  a  certificate  and  to  the  shares 
represented  thereby  can  be  transferred  only, 

(a)  By  delivery  of  the  certificate  endorsed  either  in 
blank  or  to  a  specified  person  by  the  person  appearing  by 
the  certificate  to  be  the  owner  of  the  shares  represented 
thereby,  or 

,(6)  By  delivery  of  the  certificate  and  a  separate 
document  containing  a  written  assignment  of  the  certifi- 
cate or  a  power  of  attorney  to  sell,  assign  or  transfer 
the  same  or  the  shares  represented  thereby,  signed  by  the 
person  appearing  by  the  certificate  to  be  the  owner  of 
the  shares  represented  thereby.  Such  assignment  or 
power  of  attorney  may  be  either  in  blank  or  to  a  specified 
person. 

The  provisions  of  this  section  shall  be  applicable  al- 
though the  charter  or  articles  of  incorporation  or  code 
of  regulations  or  by-laws  of  the  corporation  issuing  the 
certificate  and  the  certificate  itself  provide  that  the 
shares  represented  thereby  shall  be  transferable  only  on 
the  books  of  the  corporation  or  shall  be  registered  by  a 
registrar  or  transferred  by  a  transfer  agent. 

(Added  by  Laws  1913,  ch.  600.     In  effect  Sept.  i, 


SEC.  163.     Powers  of  those  lacking  full  legal  capacity 
and  of  fiduciaries  not  enlarged.     Nothing  in  this  article 

214 


LAWS  RELATING  TO  STOCKBROKERS 

shall  be  construed  as  enlarging  the  powers  of  an  infant 
or  other  person  lacking  full  legal  capacity,  or  of  a  trustee, 
executor  or  administrator,  or  other  fiduciary,  to  make  a 
valid  endorsement,  assignment  or  power  of  attorney. 
(Added  by  Laws  1913,  ch.  600.     In  effect  Sept.  i,, 


SEC.  164.  Corporations  not  forbidden  to  treat  regis- 
tered holder  as  owner.  Nothing  in  this  article  shall  be 
construed  as  forbidding  a  corporation, 

(a)  To  recognize  the  exclusive  right  of  a  person  regis- 
tered on  its  books  as  the  owner  of  shares  to  receive 
dividends  and  to  vote  as  such  owner,  or 

(6)  To  hold  liable  for  calls  and  assessments  a  person 
registered  on  its  books  as  the  owner  of  shares. 

(Added  by  Laws  1913,  ch.  600.     In  effect  Sept  i, 


SEC.  165.  Title  derived  from  certificate  extinguishes 
title  derived  from  a  separate  document.  The  title  of  a 
transferee  of  a  certificate  under  a  power  of  attorney  or 
assignment  not  written  upon  the  certificate,  and  the 
title  of  any  person  claiming  under  such  transferee,  shall 
cease  and  determine  if,  at  any  time  prior  to  the  surrender 
of  the  certificate  to  the  corporation  issuing  it,  another 
person,  for  value  in  good  faith,  and  without  notice  of 
the  prior  transfer,  shall  purchase  and  obtain  delivery  of 
such  certificate  with  the  indorsement  of  the  person  ap- 
pearing by  the  certificate  to  be  the  owner  thereof,  or 
shall  purchase  and  obtain  delivery  of  such  certificate 

215 


STOCK  EXCHANGE  LAWS 


and  the  written  assignment  or  power  of  attorney  of  suet 
person  though  contained  in  a  separate  document. 
(Added  by  Laws  1913,  ch.  600.     In  effect  Sept.  i 


SEC.  1  66.  Who  may  deliver  a  certificate.  —  The  delivery 
of  a  certificate  to  transfer  title  in  accordance  with  the 
provisions  of  section  one  hundred  and  sixty-two  is 
effectual,  except  as  provided  in  section  one  hundred  and 
sixty-eight,  though  made  by  one  having  no  right  of 
possession  and  having  no  authority  from  the  owner  of 
the  certificate  or  from  the  person  purporting  to  transfer 
the  title. 

(Added  by  Laws  1913,  ch.  600.  In  effect  Sept.  i,  1913.) 

SEC.  167.  Endorsement  effectual  in  spite  of  fraud, 
duress,  mistake,  revocation,  death,  incapacity  or  lack  of 
consideration  or  authority.  —  The  endorsement  of  a  cer- 
tificate by  the  person  appearing  by  the  certificate  to  be 
the  owner  of  the  shares  represented  thereby  is  effectual, 
except  as  provided  in  section  one  hundred  and  sixty- 
eight,  though  the  endorser  or  transferor, 

(a)  was  induced  by  fraud,  duress  or  mistake  to  make 
the  endorsement  or  delivery,  or 

(b)  has  revoked  the  delivery  of  the  certificate,  or  the 
authority  given  by  the  endorsement  or  delivery  of  the 
certificate,  or 

(c)  has  died  or  become  legally  incapacitated  after  the 
endorsement,  whether  before  or  after  the  delivery  of 
the  certificate,  or 

216 


LAWS  RELATING  TO  STOCKBROKERS 

(d")  has  received  no  consideration. 

(Added  by  Laws  1913,  ch.  600.     In  effect  Sept.  i, 


SEC.  168.  Rescission  of  transfer.  —  If  the  endorsement 
or  delivery  of  a  certificate, 

(a)  was  procured  by  fraud  or  duress,  or 

(b)  was  made  under  such  mistake  as  to  make  the  en- 
dorsement or  delivery  inequitable;  or 

If  the  delivery  of  a  certificate  was  made 

(c)  without  authority  from  the  owner,  or 

(d)  after  the  owner's  death  or  legal  incapacity, 

The  possession  of  the  certificate  may  be  reclaimed  and 
the  transfer  thereof  rescinded,  unless: 

i  .  The  certificate  has  been  transferred  to  a  purchaser 
for  value  in  good  faith  without  notice  of  any  facts  mak- 
ing the  transfer  wrongful,  or 

2.  The  injured  person  has  elected  to  waive  the  injury, 
or  has  been  guilty  of  laches  in  endeavoring  to  enforce  his 
rights. 

Any  court  of  appropriate  jurisdiction  may  enforce 
specifically  such  right  to  reclaim  the  possession  of  the 
certificate  or  to  rescind  the  transfer  thereof  and,  pend- 
ing litigation,  may  enjoin  the  further  transfer  of  the 
certificate  or  impound  it. 

(Added  by  Laws  1913,  ch.  600.    In  effect  Sept.  i,  1913.) 

SEC  .  1  69  .  Rescission  of  transfer  of  certificate  does  not  in- 
validate subsequent  transfer  by  transferee  in  possession.  — 
Although  the  transfer  of  a  certificate  or  of  shares  repre- 

217 


STOCK  EXCHANGE  LAWS 

sented  thereby  has  been  rescinded  or  set  aside,  neverthe- 
less, if  the  transferee  has  possession  of  the  certificate 
or  of  a  new  certificate  representing  part  or  the  whole 
of  the  same  shares  of  stock,  a  subsequent  transfer  of  such 
certificate  by  the  transferee,  mediately  or  immediately, 
to  a  purchaser  for  value  in  good  faith,  without  notice 
of  any  facts  making  the  transfer  wrongful,  shall  give  such 
purchaser  an  indefeasible  right  to  the  certificate  and 
the  shares  represented  thereby. 

(Added  by  Laws  1913,  ch.  600.   In  effect  Sept.  i,  1913.) 

SEC.  170.  Delivery  of  unendorsed  certificate  imposes 
obligation  to  endorse.  —  The  delivery  of  a  certificate  by 
the  person  appearing  by  the  certificate  to  be  the  owner 
thereof  without  the  endorsement  requisite  for  the  transfer 
of  the  certificate  and  the  shares  represented  thereby, 
but  with  intent  to  transfer  such  certificate  or  shares, 
shall  impose  an  obligation,  in  the  absence  of  an  agreement 
to  the  contrary,  upon  the  person  so  delivering,  to  com- 
plete the  transfer  by  making  the  necessary  endorsement. 
The  transfer  shall  take  effect  as  of  the  time  when  the 
endorsement  is  actually  made.  This  obligation  may  be 
specifically  enforced. 

(Added  by  Laws  1913,  ch.  600.     In  effect  Sept.  i, 


SEC.  171.  Ineffectual  attempt  to  transfer  amounts  to 
a  promise  to  transfer.  —  An  attempted  transfer  of  title  to 
a  certificate  or  to  the  shares  represented  thereby  with- 
out delivery  of  the  certificate  shall  have  the  effect  of  a 

218 


LAWS  RELATING  TO  STOCKBROKERS 

promise  to  transfer  and  the  obligation,  if  any,  imposed 
by  such  promise  shall  be  determined  by  the  law  govern- 
ing the  formation  and  performance  of  contracts. 

(Added  by  Laws  1913,  ch.  600.      In  effect  Sept.  i, 


SEC.  172.     Warranties  on  sale  of  certificate.  —  A  person 
who  for  value  transfers  a  certificate,  including  one  who 
assigns  for  value  a  claim  secured  by  a  certificate,  unless 
a  contrary  intention  appears,  warrants  — 
(a)  that  the  certificate  is  genuine, 
(6)  that  he  has  a  legal  right  to  transfer  it,  and 
(c)  that  he  has  no  knowledge  of  any  fact  which  would 
impair  the  validity  of  the  certificate. 

In  the  case  of  an  assignment  of  a  claim  secured  by  a 
certificate,  the  liability  of  the  assignor  upon  such  war- 
ranty shall  not  exceed  the  amount  of  the  claim. 

(Added  by  Laws  1913,  ch.  600.   In  effect  Sept.  i,  1913.) 

SEC.  173.  No  warranty  implied  from  accepting  pay- 
ment of  a  debt.  —  A  mortgagee,  pledgee  or  other  holder 
for  security  of  a  certificate  who  in  good  faith  demands  or 
receives  payment  of  the  debt  for  which  such  certificate 
is  security,  whether  from  a  party  to  a  draft  drawn  for  such 
debt,  or  from  any  other  person,  shall  not  by  so  doing  be 
deemed  to  represent  or  to  warrant  the  genuineness  of 
such  certificate,  or  the  value  of  the  shares  represented 
thereby. 

(Added  by  Laws  1913,  ch.  600.     In  effect  Sept.  i, 


219 


STOCK  EXCHANGE  LAWS 

SEC.  174.  No  attachment  or  levy  upon  shares  unless 
certificate  surrendered  or  transfer  enjoined.  —  No  attach- 
ment or  levy  upon  shares  of  stock  for  which  a  certificate 
is  outstanding  shall  be  valid  until  such  certificate  be 
actually  seized  by  the  officer  making  the  attachment  or 
levy,  or  be  surrendered  to  the  corporation  which  issued 
it,  or  its  transfer  by  the  holder  be  enjoined.  Except 
where  a  certificate  is  lost  or  destroyed,  such  corporation 
shall  not  be  compelled  to  issue  a  new  certificate  for  the 
stock  until  the  old  certificate  is  surrendered  to  it. 

(Added  by  Laws  1913,  ch.  600.     In  effect  Sept.   i, 


SEC.  175.  Creditor's  remedies  to  reach  certificate.  —  A 
creditor  whose  debtor  is  the  owner  of  a  certificate  shall  be 
entitled  to  such  aid  from  courts  of  appropriate  juris- 
diction, by  injunction  and  otherwise,  in  attaching  such 
certificate  or  in  satisfying  the  claim  by  means  thereof  as 
is  allowed  at  law  or  in  equity,  in  regard  to  property 
which  cannot  readily  be  attached  or  levied  upon  by 
ordinary  legal  process. 

(Added  by  Laws  1913,  ch.  600.      In  effect  Sept.  i, 


SEC.  176.  There  shall  be  no  lien  or  restriction  unless 
indicated  on  certificate.  —  There  shall  be  no  lien  in  favor 
of  a  corporation  upon  the  shares  represented  by  a  cer- 
tificate issued  by  such  corporation  and  there  shall  be  no 
restriction  upon  the  transfer  of  shares  so  represented  by 
virtue  of  any  by-law  of  such  corporation  or  otherwise, 

220 


LAWS  RELATING  TO  STOCKBROKERS 

unless  the  right  of  the  corporation  to  such  lien  or  the 
restriction  is  stated  upon  the  certificate. 

(Added  by  Laws  1913,  ch.  600.      In  effect  Sept.   i, 


SEC.  177.  Alteration  of  certificate  does  not  divest  title 
to  shares.  —  The  alteration  of  a  certificate,  whether  fraud- 
ulent or  not  and  by  whomsoever  made,  shall  not  deprive 
the  owner  of  his  title  to  the  certificate  and  the  shares  or- 
iginally represented  thereby,  and  the  transfer  of  such  a 
certificate  shall  convey  to  the  transferee  a  good  title 
to  such  certificate  and  to  the  shares  originally  repre- 
sented thereby. 

(Added  by  Laws  1913,  ch.  600.    In  effect  Sept.  i,  1913.) 

SEC.  178.  Lost  or  destroyed  certificate.  —  Where  a  cer- 
tificate has  been  lost  or  destroyed,  a  court  of  competent 
jurisdiction  may  order  the  issue  of  a  new  certificate  there- 
for on  service  of  process  upon  the  corporation  and  on 
reasonable  notice  by  publication,  and  in  any  other  way 
which  the  court  may  direct,  to  all  persons  interested  and 
upon  satisfactory  proof  of  such  loss  or  destruction  and 
upon  the  giving  of  a  bond  with  sufficient  surety  to  be 
approved  by  the  court  to  protect  the  corporation  or  any 
person  injured  by  the  issue  of  a  new  certificate  from  any 
liability  or  expense,  which  it  or  they  may  incur  by  reason 
of  the  original  certificate  remaining  outstanding.  The 
court  may  also  in  its  discretion  order  the  payment  of  the 
corporation's  reasonable  costs  and  counsel  fees.  The 
issue  of  a  new  certificate  under  an  order  of  the  court  as 

221 


STOCK  EXCHANGE  LAWS 

provided  in  this  section  shall  not  relieve  the  corporation 
from  liability  in  damages  to  a  person  to  whom  the  original 
certificate  has  been  or  shall  be  transferred  for  value 
without  notice  of  the  proceedings  or  of  the  issuance  of  the 
new  certificates. 

(Added  by  Laws  1913,  ch.  600.     In  effect  Sept.  i, 


SEC.  179.  Rule  for  cases  not  provided  for  by  this  act.  — 
In  any  case  not  provided  for  by  this  act,  the  rules  of 
law  and  equity,  including  the  law  merchant,  and  in  par- 
ticular the  rules  relating  to  the  law  of  principal  and 
agent,  executors,  administrators  and  trustees  and  to  the 
effect  of  fraud,  misrepresentation,  duress  or  coercion, 
mistake,  bankruptcy  or  other  invalidating  cause,  shall 
govern. 

(Added  by  Laws  1913,  ch.  600.     In  effect  Sept.  i, 


SEC.  1  80.  Interpretation  shall  give  effect  to  purpose  of 
uniformity.  —  This  act  shall  be  so  interpreted  and  con- 
strued as  to  effectuate  its  general  purpose  to  make  uni- 
form the  law  of  those  states  which  enact  it. 

(Added  by  Laws  1913,  ch.  600.     In  effect  Sept.  i, 


SEC.  181.  Definition  of  endorsement.  —  A  certificate  is 
endorsed  when  an  assignment  or  a  power  of  attorney  to 
sell,  assign  or  transfer  the  certificate  or  the  shares  rep- 
resented thereby  is  written  on  the  certificate  and  signed 

222 


LAWS  RELATING  TO  STOCKBROKERS 

by  the  person  appearing  by  the  certificate  to  be  the 
owner  of  the  shares  represented  thereby,  or  when  the 
signature  of  such  person  is  written  without  more  upon 
the  back  of  the  certificate.  In  any  of  such  cases  a  cer- 
tificate is  endorsed  though  it  has  not  been  delivered. 
(Added  by  Laws  1913,  ch.  600.  In  effect  Sept.  i, 


SEC.  182.  Definition  of  person  appearing  to  be  the 
owner  of  certificate.  —  -The  person  to  whom  a  certificate 
was  originally  issued  is  the  person  appearing  by  the 
certificate  to  be  the  owner  thereof,  and  of  the  shares 
represented  thereby,  until  and  unless  he  endorses  the 
certificate  to  another  specified  person,  and  thereupon 
such  other  specified  person  is  the  person  appearing 
by  the  certificate  to  be  the  owner  thereof  until  and  unless 
he  also  endorses  the  certificate  to  another  specified  person. 
Subsequent  special  endorsements  may  be  made  with  like 
effect. 

(Added  by  Laws  1913,  ch.  600.  In  effect  Sept.  i,  1913.) 

SEC.  183.  Other  definitions.  —  i.  In  this  article,  unless 
the  context  or  subject-matter  otherwise  requires  — 

"Certificate"  means  a  certificate  of  stock  in  a  corpora- 
tion organized  under  the  laws  of  this  state  or  of  another 
state  whose  laws  are  consistent  with  this  act. 

"Delivery"  means  voluntary  transfer  of  possession 
from  one  person  to  another. 

"Person"  includes  a  corporation  or  partnership  or  two 
or  more  persons  having  a  joint  or  common  interest. 

223 


STOCK  EXCHANGE  LAWS 

To  "purchase"  includes  to  take  as  mortgagee  or  as 
pledgee. 

"Purchaser"  includes  mortgagee  and  pledgee. 

"Shares"  means  a  share  or  shares  of  stock  in  a  corpora- 
tion organized  under  the  laws  of  this  state  or  of  another 
state  whose  laws  are  consistent  with  this  act. 

"State"  includes  state,  territory,  district  and  insular 
possession  of  the  United  States. 

"Transfer"  means  transfer  of  legal  title. 

"Title"  means  legal  title  and  does  not  include  a  merely 
equitable  or  beneficial  ownership  or  interest. 

"Value"  is  any  consideration  sufficient  to  support  a 
simple  contract.  An  antecedent  or  preexisting  obliga- 
tion, whether  for  money  or  not,  constitutes  value  where  a 
certificate  is  taken  either  in  satisfaction  thereof  or  a 
security  therefor. 

2.  A  thing  is  done  "  in  good  faith  "  within  the  meaning 
of  this  act,  when  it  is  in  fact  done  honestly,  whether  it 
be  done  negligently  or  not. 

(Added  by  Laws  1913,  ch.  600.  In  effect  Sept.  i,  1913.) 

SEC.  184.  Article  does  not  apply  to  existing  cer- 
tificates. The  provisions  of  this  article  apply  only  to 
certificates  issued  after  the  taking  effect  of  this  article. 

(Added  by  Laws  1913,  ch.  600.  In  effect  Sept.  i,  1913.) 

SEC.  185.  Inconsistent  legislation  repealed.  All  acts 
or  parts  of  acts  inconsistent  with  this  article  are  hereby 
repealed. 

(Added  by  Laws  1913,  ch.  600.  In  effect  Sept.  i,  1913.) 

224 


LAWS  RELATING  TO  STOCKBROKERS 

The  enacting  clause  of  this  law  (Laws,  1913,  ch.  600) 
provided  that  the  article  should  consist  of  25  sections, 
to  be  numbered  162-186,  inclusive,  but  the  body  of  the 
law  contains  only  24  sections,  one  short  of  the  number 
designated  in  the  enacting  clause. 

General  Business  Law 
(L.  1909,  chap.  25.    Laws  1909,  chap.  20.) 

Banking  Licenses. 

SEC.  25.  Licenses,  bonds  and  deposits.  —  Except  as 
provided  in  section  twenty-nine-d,  no  individual  or 
partnership  shall  hereafter  engage  directly  or  indirectly 
in  the  business  of  receiving  deposits  of  money  for  safe- 
keeping or  for  the  purpose  of  transmission  to  another 
or  for  any  other  purpose  in  cities  of  the  first  class  without 
having  first  obtained  from  the  comptroller  a  license  to 
engage  in  such  business.  Before  receiving  such  license, 
the  applicant  therefor  shall  file  with  the  comptroller  a 
written  statement  in  the  form  to  be  prescribed  by  the 
comptroller  and  verified  by  the  individual  or  members  of 
the  firm  making  the  application,  showing  the  amount  of 
the  assets  and  liabilities  of  the  applicant,  designating  the 
place  where  the  applicant  proposes  to  engage  in  business, 
that  the  applicant  has  been,  or  if  the  applicant  shall  con- 
stitute a  partnership,  that  a  majority  of  the  members 
thereof  having  a  controlling  interest  in  the  business  of 
such  partnership  have  been  continuously  for  a  period  of 
five  years  immediately  preceding  the  date  of  such  ap- 

225 


STOCK  EXCHANGE  LAWS 

plication  resident  in  the  United  States.  Such  applicant 
shall  at  the  same  time  deposit  with  the  comptroller  ten 
thousand  dollars  in  money  or  in  securities  which  shall 
consist  of  bonds  of  the  United  States,  of  this  state  or 
of  any  municipality  thereof,  or  other  bonds  approved 
by  the  comptroller,  and  if  a  deposit  of  securities  shall 
be  so  made  in  lieu  of  ten  thousand  dollars  in  money, 
the  comptroller  shall  thereafter  require  the  applicant  to 
maintain  such  deposit  at  all  times  at  a  value  which  shall 
equal  the  sum  of  ten  thousand  dollars.  In  addition  there- 
to there  shall  be  presented  to  the  comptroller  a  bond  to 
the  people  of  the  state  of  New  York  executed  by  the 
applicant  and  by  a  surety  company  approved  by  the 
comptroller,  conditioned  upon  the  faithful  holding  of  all 
moneys  that  may  be  deposited  with  the  applicant,  in 
accordance  with  the  terms  of  the  deposit  and  the  repay- 
ment of  such  moneys  so  deposited  and  upon  the  faithful 
transmission  of  any  money  which  shall  be  delivered  to 
such  applicant  for  transmission  to  another,  and  in  the 
event  of  the  insolvency  or  bankruptcy  of  the  applicant, 
upon  the  payment  of  the  full  amount  of  such  bond  to  the 
assignee,  receiver  or  trustee  of  the  applicant,  as  the  case 
may  require,  for  the  benefit  of  the  persons  making  such  de- 
posits and  of  such  persons  as  shall  deliver  money  to  the 
applicant  for  transmission  to  another.  The  penalty  of 
the  bond  shall  be  a  sum  fixed  by  the  comptroller,  which 
shall  not  be  more  than  fifty  thousand  dollars  nor  less 
than  ten  thousand  dollars.  In  lieu  of  the  aforesaid 
bond  the  applicant  may  deposit  and  the  comptroller  shall 
accept,  money  and  securities  of  the  character  above  de- 

226 


LAWS  RELATING  TO  STOCKBROKERS 

scribed.  The  money  and  securities  so  deposited  shall 
be  held  on  the  conditions  specified  in  the  aforesaid 
bond.  If  securities  be  deposited  in  lieu  of  the  afore- 
said bond,  and  be  accepted  as  hereinafter  provided,  the 
comptroller  shall  require  the  applicant  to  maintain  such 
deposit  at  a  value  equal  to  the  amount  fixed  as  the  penalty 
of  the  bond  in  lieu  of  which  such  money  and  securities 
shall  be  so  deposited.  Upon  the  receipt  of  such  applica- 
tion the  comptroller  shall  cause  to  be  posted  upon  a 
bulletin  to  be  maintained  by  him  in  his  office  in  a  place 
accessible  to  the  general  public,  at  noon  of  the  succeeding 
Friday  the  name  of  the  applicant  and  whether  individual 
or  partnership,  and  the  proposed  business  address  desig- 
nated in  the  application.  After  notice  of  the  applica- 
tion shall  have  been  so  posted  for  a  period  of  two  weeks, 
he  may  in  his  discretion  approve  or  disapprove  the  appli- 
cation. In  the  event  of  his  approval  he  shall  accept  the 
money,  securities  and  bond,  if  there  be  one,  and  hold 
them  for  the  purposes  herein  set  forth,  and  shall  issue 
a  license  authorizing  the  applicant  to  carry  on  the  afore- 
said business  at  the  place  designated  in  the  application 
and  to  be  specified  in  the  license  certificate.  For  such 
license  the  licensee  shall  pay  a  fee  of  fifty  dollars.  Such 
license  shall  not  be  transferred  or  assigned.  It  shall 
not  authorize  the  transaction  of  business  at  any  place 
other  than  that  described  in  the  license  certificate,  ex- 
cept with  the  written  approval  of  the  comptroller.  Im- 
mediately upon  the  receipt  of  the  license  certificate  issued 
by  the  comptroller  pursuant  to  this  article  the  licensee 
named  therein  shall  cause  such  license  certificate  to  be 

227 


STOCK  EXCHANGE  LAWS 

posted  and  at  all  times  conspicuously  displayed  in  the 
place  of  business  for  which  it  is  issued,  so  that  all  persons 
visiting  such  place  may  readily  see  the  same.  It  shall 
be  unlawful  for  any  person  or  partnership  holding  such 
license  certificate  to  post  such  certificate  or  to  permit 
such  certificate  to  be  posted  upon  premises  other  than 
those  designated  therein  or  to  which  it  has  been  trans- 
ferred pursuant  to  the  provisions  of  this  article,  or  know- 
ingly to  deface  or  destroy  any  such  license  certificate. 
If  it  shall  be  established  to  the  satisfaction  of  the  comp- 
troller in  accordance  with  the  rules  and  regulations  by 
him  prescribed,  that  an  unexpired  license  certificate 
issued  in  accordance  with  the  provisions  of  this  article 
has  been  lost  or  destroyed  without  fault  on  the  part  of 
the  holder,  the  comptroller  shall  issue  a  duplicate  license 
therefor.  The  money  and  securities  deposited  with  the 
comptroller  as  herein  provided  and  the  money  which  in 
case  of  default  shall  be  paid  on  the  aforesaid  bond  by 
any  applicant  or  the  surety  thereof,  shall  constitute  a 
trust  fund  for  the  benefit  of  the  depositors  of  the  licensee 
and  of  such  persons  as  shall  deliver  money  to  such 
licensee  for  transmission  to  another,  and  such  benefici- 
aries shall  be  entitled  to  an  absolute  preference  as  to 
such  money  or  securities,  over  all  general  creditors  of  the 
licensee.  Such  money  and  securities  shall  in  the  event 
of  the  insolvency  or  bankruptcy  of  the  licensee  be  deliv- 
ered by  the  comptroller  on  the  order  or  judgment  of  a 
court  of  competent  jurisdiction  to  the  assignee,  receiver 
or  trustee  of  the  licensee  designated  in  such  order  or 
judgment.  The  comptroller  shall  keep  a  book  or  books 

228 


LAWS  RELATING  TO  STOCKBROKERS 

in  which  the  licenses  granted  and  the  bonds  filed  shall  be 
entered  in  alphabetical  order,  together  with  a  statement 
of  the  date  of  the  issuance  of  the  license,  the  name  or 
names  of  the  principals,  the  place  where  the  business 
licensed  is  to  be  transacted  and  the  name  of  the  surety 
company  upon  the  bond  filed,  and  the  amount  of  all 
moneys  and  a  description  of  all  securities  deposited, 
which  record  shall  be  open  to  public  inspection.  The 
comptroller  shall  cause  to  be  printed  annually  on  the 
first  day  of  January  and  distributed  upon  application,  a 
list  of  all  licenses  granted  and  remaining  unrevoked. 
The  comptroller  shall  from  time  to  time  pay  over  to  each 
such  licensee  all  moneys  received  by  him  as  interest 
upon  any  moneys  or  securities  deposited  in  accordance 
with  the  provisions  of  this  article. 

(Added  by  L.  1910,  ch.  348.    In  effect  Sept.  i,  1910.) 

Constitutionality;  waiver  of  a  constitutional  privilege 
by  an  individual.  —  The  regulations  of  the  business  of 
receiving  deposits  is  plainly  within  the  power  possessed 
by  the  state  to  regulate  the  conduct  of  various  pursuits 
when  necessary  for  the  protection  of  the  public;  and  the 
action  of  the  Legislature  in  subjecting  to  regulation  the 
particular  class  of  people  designated  by  this  statute  is 
clearly  constitutional.  The  conditions  made  known  by 
the  commission  of  immigration  recently  appointed  by 
the  Governor  to  inquire  into  the  condition  and  welfare 
of  aliens  in  this  state  as  to  the  widespread  frauds  upon 
and  losses  by  ignorant  depositors  of  the  class  sought  to  be 
protected  and  the  knowledge  of  the  Legislature  of  these 

229 


STOCK  EXCHANGE  LAWS 

conditions  justify  the  selection  for  regulations  of  the 
persons  selected.  An  individual  may  waive  even  a  con- 
stitutional provision  for  his  benefit,  when  no  question 
of  public  policy  or  public  morals  is  involved;  and  when  a 
bond  is  given  in  accordance  with  this  section  the  person 
giving  such  bond  thereby  waives  the  right  to  question  the 
constitutionality  of  this  statute,  and  his  surety  is  estop- 
ped from  raising  that  question  in  an  action,  thereafter 
brought  against  it,  by  those  who  made  deposits  on  the 
faith  of  the  undertaking.  Nor  is  the  statute  uncon- 
stitutional as  infringing  on  the  exclusive  right  of  Con- 
gress to  regulate  foreign  and  interstate  commerce.  It 
is  doubtless  true  that  this  statute  may  incidentally 
and  indirectly  affect  the  business  of  transmitting  moneys 
abroad.  But  it  is  well  settled  that  the  law  although 
in  a  limited  degree  affecting  interstate  commerce  is  not 
for  that  reason  a  needless  intrusion  upon  Federal  juris- 
diction or  strictly  a  regulation  of  interstate  commerce, 
but  is  to  be  considered  as  an  ordinary  police  regulation 
and  therefore  not  invalid.  Musco  v.  United  Surety  Co., 
196  N.  Y.  459  (1909),  affg.  132  App.  Div.  300,  117  N.  Y. 
Supp.  21 ;  Guffanti  v.  National  Surety  Co.,  196  N.  Y. 
452  (1909),  affg.  133  App.  Div.  610,  118  N.  Y.  Supp. 
207;  Benvegna  v.  United  Surety  Co.,  196  N.  Y.  453, 
(1909),  affg.  132  App.  Div.  925, 117  N.  Y.  Supp.  26. 

SEC.  26.  Books  to  be  kept  and  records  to  be  made; 
revocation  of  licenses. —  Each  licensee  shall  keep  books  of 
account  showing  full  and  complete  records  of  all  busi- 
ness transacted  and  a  full  statement  of  all  assets  and 

230 


LAWS  RELATING  TO  STOCKBROKERS 

liabilities,  and  shall  four  times  in  each  year  as  of  such 
days  as  the  comptroller  shall  designate  by  a  notice  to 
be  posted  on  the  bulletin  in  his  office  and  by  written  no- 
tice delivered  at  the  place  of  business  of  such  licensee 
or  deposited  in  the  post-office  in  a  postpaid  wrapper 
directed  to  him  at  such  place  of  business,  filed  in  the 
comptroller's  office  within  ten  days  after  the  date  of  such 
notice,  a  written  statement  under  oath  in  such  form 
as  shall  be  prescribed  by  the  comptroller,  showing  the 
amount  of  the  assets  and  liabilities  of  the  licensee,  which 
report  shall  be  accessible  to  the  public  at  all  reasonable 
times.  The  license  issued  shall  be  revocable  at  all 
times  by  the  comptroller  for  cause  shown,  and  in  the 
event  of  such  revocation  or  of  a  surrender  of  such  license, 
no  refund  shall  be  made  in  respect  of  any  license  fee 
paid  under  the  provisions  of  this  article.  Every  license 
certificate  shall  be  surrendered  to  the  comptroller  within 
twenty-four  hours  after  notice  in  writing  to  the  holder 
that  such  license  has  been  revoked.  In  case  of  the 
revocation  of  such  license  the  money  and  securities 
and  the  bond,  if  there  be  one,  received  from  the  licensee, 
shall  continue  to  be  held  by  the  comptroller,  until 
otherwise  directed  by  the  order  or  judgment  of  a  court 
of  competent  jurisdiction. 

(Added  by  L.  1910,  ch.  348.    In  effect  Sept.  i,  1910.) 

SEC.  27.  Penalties  for  conducting  business  without 
license,  et  cetera. — Any  person  or  partnership  carrying 
on  the  business  specified  in  section  twenty-five  of  this 
article  without  having  obtained  from  the  comptroller  a 

231 


STOCK  EXCHANGE  LAWS 

license  therefor,  or  who  shall  carry  on  such  business 
after  the  revocation  of  a  license  to  carry  on  such  business, 
or  who,  without  such  license  shall,  on  any  sign,  letter- 
head, advertisement  or  publication  of  any  kind  use  the 
word  "banking"  or  " banker"  or  any  equivalent  term, 
in  any  language,  in  connection  with  any  business  what- 
soever, or  who  shall  fail  to  display  the  license  certifi- 
cate as  provided  in  section  twenty-five  hereof,  or  who 
shall  fail  to  keep  books  of  account  or  to  make  the  reports 
as  herein  provided,  or  who  shall  advertise  or  publish 
in  any  manner  whatsoever,  either  orally  or  in  writing, 
any  statement  intended  to  convey  or  actually  conveying 
the  idea  or  impression  that  such  licensee  is  in  any  way 
under  the  supervision  of  this  state  or  of  any  officer 
thereof,  or  that  this  state  or  any  officer  thereof  has  passed 
in  any  way  whatsoever  upon  the  responsibility,  sol- 
vency or  qualifications  of  such  licensee  to  engage  in  such 
business,  or  that  this  state  or  any  officer  thereof  has  ex- 
amined any  accounts  of  said  licensee  or  has  in  any 
way  certified  that  such  licensee  is  in  any  way  a  fit 
person  to  carry  on  such  business,  shall  be  guilty  of  a 
misdemeanor. 

(Added  by  L.  1910,  ch.  348,  in  effect  Sept.  i,  1910.) 

SEC.  28.  Perjury. — Any  person  who  in  any  applica- 
tion for  a  license  presented  to  the  comptroller,  or  in  any 
report  made  under  this  article,  shall  swear  falsely  as  to 
the  amount  of  the  assets  or  liabilities  of  the  applicant, 
or  as  to  the  amount  of  the  assets  or  liabilities  of  a  licensee, 
or  in  any  other  particular,  or  in  any  affidavit  made  under 

232 


LAWS  RELATING  TO  STOCKBROKERS 

section  twenty-nine-d  of  this  article  shall  swear  falsely 
as  to  any  fact  therein  stated,  is  guilty  of  perjury. 
(Added  by  L.  1910,  ch.  348,  in  effect  Sept.  i,  1910.) 

SEC.  29.  Penalty  for  failure  to  make  reports. — Any 
person  or  partnership  who  shall  fail  to  make  any  report 
required  by  this  article  within  the  time  specified  for  the 
same,  shall  forfeit  to  the  people  of  the  state  of  New  York 
the  sum  of  one  hundred  dollars  for  every  day  that  such 
report  shall  be  delayed  or  withheld.  The  money  forfeited 
under  this  section  shall  be  recovered  in  an  action  brought 
in  the  name  of  the  people  of  the  state,  and  with  all  moneys 
received  as  fees  for  the  issuance  of  the  licenses  provided 
for  herein  shall  be  paid  into  the  state  treasury  to  the 
credit  of  the  general  fund. 

(Added  by  L.  1910,  ch.  348,  in  effect  Sept.  i,  1910.) 

(L.  1909,  chap.  25.  Consol.  Laws  1909,  chap.  20.) 
SEC.  379.  Interest  permitted  on  advances  on  collateral 
security. — In  any  case  hereafter  in  which  advances  of 
money,  repayable  on  demand,  to  an  amount  not  less 
than  five  thousand  dollars,  are  made  upon  warehouse 
receipts,  bills  of  lading,  certificates  of  stock,  certificates 
of  deposit,  bills  of  exchange,  bonds  or  other  negotiable 
instruments  pledged  as  collateral  security  for  such  repay- 
ment, it  shall  be  lawful  to  receive  or  to  contract  to 
receive  and  collect,  as  compensation  for  making  such  ad- 
vances, any  sum  to  be  agreed  upon  in  writing,  by  the 
parties  to  such  transaction. 
Source,,-~L.  1882,  ch.  237,  sec.  i. 

233 


STOCK  EXCHANGE  LAWS 

Reference. — See  Banking  L.,  sec.  75. 

Written  contract  is  not  necessary.  In  re  Wilde's 
Sons,  138  Fed.  Rept.  562  (1904). 

Effect. — Hawley  v.  Kountze,  6  App.  Div.  217,  39  N. 
Y.  Supp.  897  (1896). 

(L.  1909,  chap.  25.     Consol.  Laws  1909,  chap.  22.) 

SEC.  380.  Brokerage  on  loans. — No  person  shall, 
directly  or  indirectly,  take  or  receive  more  than  fifty 
cents  for  a  brokerage,  soliciting,  driving  or  procuring  the 
loan  or  forbearance  of  one  hundred  dollars,  and  in  that 
proportion  for  a  greater  or  less  sum,  except  loans  on  real 
estate  security;  nor  more  than  thirty-eight  cents  for 
making  or  renewing  any  bond,  bill,  note  or  other  security 
given  for  such  loan  or  forbearance,  or  for  any  counter 
bond,  bill,  note  or  other  security  concerning  the  same. 

Source. — R.  S.  pt.  i,  ch.  20,  tit.  19,  sec.  i,  as  amended 
by  L.  1895,  ch.  467. 

Effect  of  statute  is  not  to  render  contract  wholly 
void.  Buchanan  v.  Tilden,  18  App.  Div.  123;  45  N.  Y. 
Supp.  417  (1897). 

Length  of  time  loan  is  to  run  does  not  affect  commis- 
sion. Corp.  v.  Brown,  2  Sandf.  293  (1848);  Broad  v. 
Hoffman,  6  Barb.  177  (1848);  Cook  v.  Phillips,  56  N.  Y. 
310  (1874). 

Computation  is  upon  the  value  of  the  currency  called 
for  by  contract.  Brown  v.  Post,  6  Robt.  in  (1868). 

Promise  to  pay  illegal  compensation  does  not  affect 
broker's  right  to  recover  legal  compensation.  Vander- 
poel  v.  Kearns,  2  E.  D.  Smith,  170  (1853) 

234 


LAWS  RELATING  TO  STOCKBROKERS 

SEC.  381 .  Recovery  of  excess. — Every  person  who  shall 
pay,  deliver  or  deposit  any  money,  property  or  thing  in 
action,  over  and  above  the  rate  aforesaid,  and  his  personal 
representatives  may,  within  one  year  after  such  payment, 
delivery  or  deposit,  sue  for  and  recover  the  same  of 
the  person  so  taking  or  receiving  such  money,  property 
or  thing  in  action,  or  of  his  personal  representatives. 

In  case  such  suit  shall  not  be  brought  within  the  time 
above  prescribed  in  good  faith,  or  in  case  it  shall  be  dis- 
continued, or  wilfully  delayed,  then  the  overseers  of  the 
poor  of  the  city  or  town  where  the  offense  was  committed, 
may  within  one  year  after  such  neglect,  discontinuance 
or  delay,  sue  for  and  recover  the  money,  property  or 
thing  in  action,  so  received,  delivered  or  deposited,  from 
the  person  receiving  the  same,  or  his  personal  representa- 
tives, for  the  use  of  the  poor  of  the  county. 

Source. — R.  S.  pt.  i,  ch.  20,  title  19,  sees.  2,  3. 

Action  for  recovery  may  be  commenced  before  con- 
tract is  fully  performed.  Woodward  v.  Stearns,  10 
Abb.  Pr.  N.  S.  395  (1871). 

SEC.  382.  Restitution  a  bar  to  further  penalties . — Upon 
the  repayment  and  return  of  the  money,  property  or 
other  thing  so  illegally  received,  with  the  payment  of 
the  costs  of  such  suit,  the  person  making  such  return 
shall  be  acquitted  and  discharged  from  any  other  punish- 
ment, forfeiture  or  penalty  which  he  may  have  incurred 
by  reason  of  having  so  illegally  received  such  money, 
property  or  other  thing  so  returned. 

Source. — R.  S.  pt.  i,  ch.  20,  tit.  19,  sec.  5. 

235 


STOCK  EXCHANGE  LAWS 
Tax  Law 

(L.  1909,  chap.  62.  Consol.  Laws  1909,  chap.  60.) 
SEC.  270.  Amount  of  tax. — There  is  hereby  imposed 
and  shall  immediately  accrue  and  be  collected  a  tax,  as 
herein  provided,  on  all  sales,  or  agreements  to  sell,  or 
memoranda  of  sales  of  stock,  and  upon  any  and  all  de- 
liveries of  transfers  of  shares,  or  certificates  of  stock, 
in  any  domestic  or  foreign  association,  company  or  cor- 
poration, made  after  the  first  day  of  June,  nineteen 
hundred  and  five,  whether  made  upon  or  shown  by  the 
books  of  the  association,  company  or  corporation,  or  by 
any  assignment  in  blank,  or  by  any  delivery,  or  by  any 
paper  or  agreement  or  memorandum  or  other  evidence 
of  sale  or  transfer,  whether  intermediate  or  final,  and 
whether  investing  the  holder  with  the  beneficial  interest 
in  or  legal  title  to  said  stock,  or  merely  with  the  pos- 
session or  use  thereof  for  any  purpose,  or  to  secure  the 
future  payment  of  money,  or  the  future  transfer  of  any 
stock,  on  each  hundred  dollars  of  face  value  or  fraction 
thereof,  two  cents.  It  shall  be  the  duty  of  the  person  or 
persons  making  or  effectuating  the  sale  or  transfer  to 
procure  and  affix  the  stamps  and  pay  the  tax  provided  by 
this  article.  It  is  not  intended  by  this  act  to  impose  a 
tax  upon  an  agreement  evidencing  the  deposit  of  stock 
certificates  as  collateral  security  for  money  loaned  thereon 
which  stock  certificates  are  not  actually  sold,  nor  upon 
such  stock  certificates  so  deposited,  nor  upon  mere  loans 
of  stock  for  the  return  thereof.  The  payment  of  such 
tax  shall  be  denoted  by  an  adhesive  stamp  or  stamps 
affixed  as  follows:  In  the  case  of  a  sale  or  transfer, 

236 


LAWS  RELATING  TO  STOCKBROKERS 

where  the  evidence  of  the  transaction  is  shown  only  by 
the  books  of  the  association,  company  or  corporation, 
the  stamp  shall  be  placed  upon  such  books,  and  it  shall 
be  the  duty  of  the  person  making  or  effectuating  such  sale 
or  transfer  to  procure  and  furnish  to  the  association,  com- 
pany or  corporation  the  requisite  stamps,  and  of  such 
association,  company  or  corporation  to  affix  and  cancel  the 
same.  Where  the  transaction  is  effected  by  the  delivery 
or  transfer  of  a  certificate,  the  stamp  shall  be  placed  upon 
the  surrendered  certificate ;  and  in  cases  of  an  agreement 
to  sell,  or  where  the  sale  is  effected  by  delivery  of  the 
certificate  assigned  in  blank,  there  shall  be  made  and 
delivered  by  the  seller  to  the  buyer,  a  bill  or  memorandum 
of  such  sale  to  which  the  stamp  provided  for  by  this 
article  shall  be  affixed.  Every  such  bill  or  memorandum 
of  sale  or  agreement  to  sell  shall  show  the  date  of  the 
transaction  which  it  evidences,  the  name  of  the  seller, 
the  stock  to  which  it  relates,  and  the  number  of  shares 
thereof;  and  no  further  tax  is  hereby  imposed  upon  the 
delivery  of  the  certificate  of  stock,  or  upon  the  actual 
issue  of  a  new  certificate  when  the  original  certificate 
of  stock  is  accompanied  by  the  duly  stamped  memo- 
randum of  sale  as  herein  provided.  (Amended  byL.  1910, 
ch.  38;  L.  1911,  ch.  352,  and  L.  1912,  ch.  292,  in  effect 
May  i,  1912.) 

Application.  —  The  statute  relates  to  sales  or  transfers 
of  shares  or  certificates  of  stock  in  "associations  and 
companies"  as  well  as  in  corporations.  Rept.  of  Atty. 
Genl.  (1911),  Vol.  2,  p.  692. 

No  tax  is  imposed  on  a  deposit  of  stock  as  collateral 

237 


STOCK  EXCHANGE  LAWS 

security  to  a  loan  when  the  title  to  the  stock  is  not 
actually  transferred  on  the  books  of  the  corporation. 
The  rule  is  otherwise,  however,  if  by  reason  of  a  default 
in  the  payment  of  the  loan  or  otherwise  the  transfer  ripens 
into  a  sale.  Rept.  of  Atty.  Genl.  (1911),  Vol.  2,  p.  577. 

Effect  of  amendment  of  ign. —  Prior  to  the  adoption  of 
this  amendment  it  was  frequently  contended  that  the 
statute  related  only  to  sales  or  transfers  of  stock  which 
operated  to  invest  the  transferee  with  the  beneficial 
interest  in  or  ownership  of  the  stock,  and  the  amend- 
ment in  question  providing  in  express  terms  for  a  tax, 
not  only  upon  sales  or  transfers  of  stock  but  upon  de- 
liveries or  transfers  of  shares  or  certificates  of  stock, 
"whether  investing  the  holder  with  the  beneficial  interest 
in  or  legal  title  to  stock  or  merely  with  the  possession 
or  use  thereof  for  any  purpose,"  was  adopted  to  settle 
this  dispute.  Rept.  of  Atty.  Genl.  (1911),  Vol.  2,  p.  697. 

Since  the  amendment  of  1911  transfers  which  operate 
to  effect  a  change  in  the  legal  title  to  stock  are  taxable 
though  the  intermediate  holder  of  the  stock  be  acting 
merely  as  a  trustee  for  the  transferee.  Rept.  of  Atty. 
Genl.  (1911),  Vol.  2,  p.  695.  Transfers  of  stock  to 
voting  trustees  or  nominees  are  taxable.  Rept.  of  Atty. 
Genl.  (1911),  Vol.  2,  p.  616. 

Taxable  transfers.  —  Where  stock  is  issued  pursuant 
to  an  agreement  whereby  the  subscriber  is  on  certain 
conditions  to  return  a  portion  thereof  to  the  treasury 
of  the  company,  and  a  return  is  made  accordingly,  the 
latter  transfer  is  taxable.  Rept.  of  Atty.  Genl.  (1911), 
Vol.  2,  p.  554. 

238 


LAWS  RELATING  TO  STOCKBROKERS 

Surrenders  of  certificates  of  stock,  held  by  the  Stand- 
ard Oil  Company,  to  its  various  subsidiary  corporations 
and  the  issuance  of  new  certificates  of  those  companies 
to  the  stockholder  of  the  Standard  Oil  Company  are 
taxable  transfers.  Kept,  of  Atty.  Genl.,  Mch.  7,  1912. 

Where  a  corporation,  as  a  consideration  for  the  sale 
to  it  of  the  assets  of  a  second  corporation,  issues  and 
delivers  certificate  of  its  capital  stock  to  and  in  the  name 
of  the  selling  corporation,  the  subsequent  distribution 
of  said  stock  by  the  directors  of  the  latter  among  its 
stockholders  according  to  their  respective  holding  in 
said  corporation  constitutes  taxable  transfers.  Rept. 
of  Atty.  Genl.  (1911),  Vol.  2,  p.  697. 

Where  foreign  insurance  company  has,  in  compliance 
with  the  provisions  of  section  27  of  the  Insurance  Law, 
by  a  deed  of  trust  transferred  to  certain  individual 
trustees  corporate  stock,  the  subsequent  transfer  of 
said  stock  to  a  corporation  substituted  as  trustee  in 
place  of  such  individual  trustee  is  taxable.  Rept.  of 
Atty.  Genl.  (1911),  Vol.  2,  p.  575. 

Transfers  of  stock  to  or  from  "  nominee"  are  taxable 
under  the  law  as  amended  by  Chapter  352  of  the  Laws  of 
1911.  Deliveries  of  certificates  of  stock,  made  against 
receipt,  but  without  payment,  by  order  and  for  account 
of  a  foreign  client  are  taxable.  Rept.  of  Atty.  Genl. 
(1911),  Vol.  2,  p.  586. 

Transfers  of  voting  trust  certificates  constitute  trans- 
fers of  stock  within  the  meaning  of  the  Stock  Transfer 
Tax  Law  and  accordingly  are  taxable.  Rept.  of  Atty. 
Genl.  (1911),  Vol.  2,  p.  616. 

239 


STOCK  EXCHANGE  LAWS 

A  compromise  of  claims  for  stock  transfer  taxes 
cannot  be  made  by  the  Comptroller.  Rept.  of  Atty. 
Genl.  (1911),  Vol.  2^.583. 

SEC.  271.  Stamps,  how  prepared  and  sold.  —  Adhesive 
stamps  for  the  purpose  of  paying  the  state  tax  provided 
for  by  this  article  shall  be  prepared  by  the  State  Comp- 
troller, in  such  form  and  of  such  denominations  and  in 
such  quantities  as  he  may  from  time  to  time  prescribe, 
and  shall  be  sold  by  him  to  the  person  or  persons  desir- 
ing to  purchase  the  same;  he  shall  make  provision  for 
the  sale  of  such  stamps  in  such  places  and  at  such  times 
as  in  his  judgment  he  may  deem  necessary. 

Source.  —  Former  Tax  L.  (L.  1896,  ch.  908),  sec. 
316,  as  added  by  L.  1895,  ch.  341. 

Forging  state  stamps,  a  misdemeanor.  Penal  Law, 
sec.  892. 

SEC.  27i-a.  Sale  of  Stamps. — The  proprietary  interest 
which  one  has  in  stamps  purchased  under  the  provisions 
of  the  Stock  Transfer  Law  is  of  a  limited  and  peculiar 
character,  and  the  Legislature  may  limit  the  right  to  sell 
such  stamps  to  those  who  are  duly  licensed  without 
violating  the  provisions  of  either  the  State  or  Federal 
Constitution.  People  ex  rel.  Isaacs  v.  Moran  (1911),  74 
Misc.  491. 

Selling  stamps  without  consent  of  Comptroller;  defense. 
—  It  is  no  defense  to  one  charged  with  selling  stamps, 
issued  pursuant  to  this  section,  as  amended  in  191 1,  with- 
out the  consent  of  the  State  Comptroller,  that  when  said 

240 


LAWS  RELATING  TO  STOCKBROKERS 

amendment  took  effect  he  had  in  possession  about  $1,000 
worth  of  stamps  which  he  had  purchased  under  the 
original  statute  which  did  not  require  that  the  seller  of 
stamps  should  first  obtain  the  written  consent  of  the 
State  Comptroller.  People  ex  rel.  Isaacs  v.  Moran 
(1911),  74  Misc.  491. 

SEC.  272.  Penalty  for  failure  to  pay  tax.  —  Any  per- 
son or  persons  liable  to  pay  the  tax  by  this  article  imposed, 
and  any  one  who  acts  in  the  matter  as  agent  or  broker 
for  such  person  or  persons,  who  shall  make  any  sale, 
transfer  or  delivery  of  shares  or  certificates  of  stock, 
without  paying  the  tax  by  this  article  imposed,  and 
any  person  who  shall  in  pursuance  of  any  sale,  transfer 
or  agreement,  deliver  any  stock  or  evidence  of  the  sale  or 
transfer  of  or  agreement  to  sell  any  stock,  or  bill  or 
memorandum  thereof,  or  who  shall  transfer  or  cause  the 
same  to  be  transferred  upon  the  books  or  records  of  the 
association,  company  or  corporation,  and  any  association, 
company  or  corporation  whose  stock  is  sold  or  trans- 
ferred, which  shall  transfer  or  cause  the  same  to  be 
transferred  upon  its  books,  without  having  the  stamps 
provided  for  in  this  article  affixed  thereto,  shall  be 
deemed  guilty  of  a  misdemeanor,  and  upon  conviction 
thereof  shall  pay  a  fine  of  not  less  than  five  hundred 
nor  more  than  one  thousand  dollars,  or  be  imprisoned 
for  not  more  than  six  months  or  by  both  such  fine  and 
imprisonment,  in  the  discretion  of  the  court. 

(Amended  by  L.  1911,  ch.  352,  and  L.  1912,  ch.  292, 
in  effect  May  i,  1912.) 

241 


STOCK  EXCHANGE  LAWS 

SEC.  273.  Canceling  stamps;  penalty  for  failure.  — • 
In  every  case  where  an  adhesive  stamp  shall  be  used  to 
denote  the  payment  of  the  tax  provided  by  this  article, 
the  person  using  or  affixing  the  same  shall  write  or  stamp 
thereupon  the  initials  of  his  name  and  the  date  upon  which 
the  same  shall  be  attached  or  used,  and  shall  cut  or  per- 
forate the  stamp  in  a  substantial  manner,  so  that  such 
stamps  cannot  be  again  used;  and  if  any  person  makes 
use  of  an  adhesive  stamp  to  denote  the  payment  of  the 
tax  imposed  by  this  article,  without  so  effectually  can- 
celing the  same,  such  person  shall  be  deemed  guilty  of  a 
misdemeanor,  and  upon  conviction  thereof  shall  pay  a 
fine  of  not  less  than  two  hundred  nor  more  than  five 
hundred  dollars  or  be  imprisoned  for  not  less  than  six 
months,  or  both,  in  the  discretion  of  the  court. 

(Amended  by  L.  1911,  ch.  352,  in  effect  June  i5th, 
1911.) 

SEC.  274.  Contracts  for  dies;  expenses,  how  paid.  — 
The  State  Comptroller  is  hereby  directed  to  make,  enter 
into  and  execute  for  and  in  behalf  of  the  state  such  con- 
tract or  contracts  for  dies,  plates  and  printing  necessary 
for  the  manufacture  of  the  stamps  provided  for  by  this 
article,  and  provide  such  stationery  and  clerk  hire  to- 
gether with  such  books  and  blanks  as  in  his  dis- 
cretion may  be  necessary  for  putting  into  operation 
the  provisions  of  this  article;  he  shall  be  the  cus- 
todian of  all  stamps,  dies,  plates  or  other  material  or 
thing  furnished  by  him  and  used  in  the  manufacture 
of  such  state  tax  stamps,  and  all  expenses  incurred 

242 


LAWS  RELATING  TO  STOCKBROKERS 

by  him  and  under  his  direction  in  carrying  out  the 
provisions  of  this  article  shall  be  paid  to  him  by  the 
State  Treasurer  from  any  moneys  appropriated  for  such 
purpose. 

Source.  —  Former  Tax  L.  (L.  1896,  ch.  908),  sec.  319, 
as  added  by  L.  1905,  ch.  24. 

SEC.  275.  Illegal  use  of  stamps;  penalty.  —  Any  person 
who  shall  wilfully  remove  or  alter  or  knowingly  permit 
to  be  removed  or  altered  the  canceling  or  defacing  marks 
of  any  stamp  provided  for  by  this  article  with  intent  to 
use  such  stamp,  or  who  shall  knowingly  or  wilfully  buy, 
prepare  for  use,  use,  have  in  his  possession  or  suffer  to  be 
used  any  washed,  restored  or  counterfeit  stamp,  and 
any  person  who  shall  intentionally  remove  or  cause  to  be 
removed  or  knowingly  permit  to  be  removed  any  stamp, 
affixed  pursuant  to  the  requirements  of  this  article,  shall 
be  guilty  of  a  misdemeanor  and  on  conviction  thereof 
shall  be  liable  to  a  fine  of  not  less  than  five  hundred  nor 
more  than  one  thousand  dollars,  or  be  imprisoned  for  not 
more  than  one  year,  or  by  both  such  fine  and  imprison- 
ment, at  the  discretion  of  the  court.  (Amended  by 
L.  1911,  ch.  12,  and  L.  1912,  ch.  292,  in  effect  May  i, 
1912.) 

SEC.  276.  Power  of  State  Comptroller.  —  Every  per- 
son, firm,  company,  association  or  corporation  engaged 
in  whole  or  in  part  in  the  making  or  negotiating  of  sales, 
agreements  to  sell,  deliveries  or  transfer  of  shares  or 
certificates  of  stock,  or  conducting  or  transacting  a 
brokerage  business,  shall  keep  or  cause  to  be  kept  at 

243 


STOCK  EXCHANGE  LAWS 

some  accessible  place  within  the  state  of  New  York, 
a  just  and  true  book  of  account,  in  such  form  as  may  be 
prescribed  by  the  comptroller,  wherein  shall  be  plainly 
and  legibly  recorded  in  separate  columns,  the  date  of 
making  every  sale,  agreement  to  sell,  delivery  or  trans- 
fer of  shares  or  certificates  of  stock,  the  name  of  the 
stock,  and  the  number  of  shares  thereof,  the  face  value 
of  the  stock,  the  name  of  the  seller  or  transferor,  the 
name  of  the  purchaser  or  transferee  and  the  number  and 
face  value  of  the  adhesive  stamp  affixed  as  provided 
for  by  section  two  hundred  and  seventy  of  this  chapter. 
Every  association,  company  or  corporation  shall  keep 
or  cause  to  be  kept  at  some  accessible  place  within  the 
state  of  New  York,  a  stock  certificate  book  and  a  just 
and  true  book  of  account,  transfer  ledger  or  register, 
in  such  form  as  may  be  prescribed  by  the  comptroller, 
wherein  shall  be  plainly  and  legibly  recorded  in  separate 
columns  the  date  of  making  every  transfer  of  stock,  the 
name  of  the  stock  and  the  number  of  shares  thereof, 
the  serial  number  of  each  surrendered  certificate,  the 
name  of  the  party  surrendering  such  certificate,  the 
serial  number  of  the  certificate  issued  in  exchange 
therefor,  the  number  of  shares  covered  by  said  certificate, 
the  name  of  the  party  to  whom  said  certificate  was  issued 
and  the  number  and  face  value  of  the  adhesive  stamps 
affixed,  as  provided  by  section  two  hundred  and  seventy 
of  this  chapter.  It  shall  also  retain  and  keep  all  sur- 
rendered or  canceled  shares  or  certificates  of  its  stock 
and  all  memoranda  relating  to  the  sale  or  transfer  of 
any  thereof,  All  such  books  of  account,  transfer  led- 

244 


LAWS  RELATING  TO  STOCKBROKERS 

gers,  registers  and  stock  certificate  books,  shall  be 
retained  and  kept  as  aforesaid  for  a  period  of  at  least 
two  years  subsequent  to  the  date  of  the  last  entry  made 
therein  as  herein  required;  and  all  such  surrendered  or 
canceled  shares  or  certificates  of  stock  and  memoranda 
relating  to  the  sale  or  transfer  of  stock,  shall  be  retained 
and  kept  for  a  period  of  at  least  two  years  from  the  date 
of  the  delivery  thereof.  For  the  purpose  of  ascertain- 
ing whether  the  tax  imposed  by  this  article  has  been 
paid,  all  such  books  of  account,  transfer  ledgers,  regis- 
ters, stock  certificate  books,  surrendered  or  canceled 
shares  or  certificates  of  stock  and  memoranda  relating 
to  the  sale  or  transfer  thereof,  shall  at  all  times  between 
the  hours  of  ten  o'clock  in  the  forenoon  and  three  o' 
clock  in  the  afternoon,  except  Saturdays,  Sundays  and 
legal  holidays,  be  open  to  examination  by  the  comptrol- 
ler or  his  duly  authorized  representative. 

The  comptroller  may  enforce  his  right  to  examine  such 
books  of  account  and  bills  or  memoranda  of  sale  or 
transfer;  and  such  transfer  ledger,  register  and  stock 
certificate  books  and  surrendered  or  canceled  shares  or 
certificates  of  stock  by  mandamus.  If  the  comptroller 
ascertains  that  the  tax  provided  for  in,  this  article  has  not 
been  paid,  he  shall  bring  an  action  in  his  name  as  such 
comptroller,  in  any  court  of  competent  jurisdiction 
for  the  recovery  of  such  tax  and  for  any  penalty  incur- 
red by  any  person  under  the  provisions  of  this  article. 

Every  person,  firm,  company,  association  or  corpora- 
tion who  shall  fail  to  keep  such  book  of  account  or 
bills  or  memoranda  of  sale  or  transfer,  or  transfer  ledger, 

245 


STOCK  EXCHANGE  LAWS 

register  or  stock  certificate  book  or  surrendered  or  can- 
celed shares  or  certificates  of  stock  as  herein  required, 
or  who  alters,  cancels,  obliterates  or  destroys  any  part 
of  said  records,  or  makes  any  false  entry  therein,  or 
who  shall  refuse  to  permit  the  comptroller  or  any  of  his 
duly  authorized  representatives  freely  to  examine  any 
of  said  books,  records  or  papers  at  any  of  the  times  herein 
provided,  or  who  shall  in  any  other  respect  violate  any 
of  the  provisions  of  this  section  shall  be  deemed  guilty 
of  a  misdemeanor  and  on  conviction  thereof  shall  for 
each  and  every  such  offense  pay  a  fine  of  not  less  than 
five  hundred  dollars  nor  more  than  five  thousand  dollars, 
or  be  imprisoned  not  less  than  three  months  nor  more 
than  two  years,  or  both,  in  the  discretion  of  the  court. 

(Amended  by  L.  1910,  ch.  453;  L.  1911,  ch.  352,  and 
L.  1912,  ch.  292,  in  effect  May  i,  1912.) 

Books  and  records.  —  The  fact  that  stock  books  of  a 
New  York  Corporation  are  kept  at  its  place  of  business 
in  the  state  of  Rhode  Island  does  not  relieve  the  cor- 
poration from  the  duty  imposed  upon  it  by  this  section, 
and  such  corporation  must  keep  the  books  and  records 
required  by  said  section.  Rept.of  Atty.  Genl.  Vol.  2. p. 674. 

SEC.  277.  Civil  penalties;  how  recovered.  — Any  per- 
son, firm,  company,  association  or  corporation  who  shall 
violate  any  of  the  provisions  of  section  two  hundred  and 
seventy  or  section  two  hundred  and  seventy-two  of  this 
chapter  shall  in  addition  to  the  penalties  herein  pro- 
vided forfeit  to  the  people  of  the  state  a  civil  penalty 
of  ten  dollars  for  each  and  every  share  of  stock  so  sold 

246 


LAWS  RELATING  TO  STOCKBROKERS 

or  transferred  or  transferred  or  entered  upon  the  books 
of  the  corporation,  as  the  case  may  be,  without  the 
payment  of  the  tax  by  this  article  imposed  thereon. 
Any  person  who  shall  violate  any  of  the  other  pro- 
visions of  this  article  shall  in  addition  to-  the  penalties 
hereinbefore  provided  forfeit  to  the  people  of  the  state 
a  civil  penalty  of  five  hundred  dollars  for  each  and  every 
such  violation. 

The  State  Comptroller  shall  bring  an  action  in  his 
name  as  such  comptroller  in  any  court  of  competent  ju- 
risdiction for  the  recovery  of  any  civil  penalty;  and  all 
moneys  collected  by  him  shall  be  paid  into  the  state 
treasury.  In  an  action  against  a  corporation  or  its 
transfer  agent  to  recover  a  penalty  because  of  its  transfer 
of  stock  upon  the  books  or  records  of  the  corporation 
without  requiring  the  payment  of  the  tax  by  this  article 
imposed,  the  failure  of  the  corporation  or  its  transfer 
agent,  on  the  demand  of  the  comptroller  or  his  duly  au- 
thorized representative  to  produce  the  surrendered  cer- 
tificate or  memoranda  of  sale  with  the  required  stamps 
attached,  shall  constitute  prima  facie  proof  of  the  non- 
payment of  the  tax  imposed  by  section  two  hundred  and 
seventy  of  this  chapter. 

(Amended  by  L.  1912,  ch.  292,  in  effect  May  i,  1912.) 

SEC.  278.  Effect  of  failure  to  pay  tax. — The  effect 
of  this  section  is  not  to  impose  upon  the  vendor  who 
fails  to  pay  the  tax  a  forfeiture  of  his  property,  but  simply 
denies  to  him  the  right  to  enforce  the  contract  of  sale, 
and  hence  the  provision  is  not  unconstitutional.  Sheri- 

247 


STOCK  EXCHANGE  LAWS 

dan  v.  Tucker  (1911),  145  App.  Div.  145,  129  N.  Y. 
Supp.  18. 

The  donee  of  corporate  stock  claiming  title  by  gift 
causa  mortis  or  inter  vivos  can  prove  such  gift  only  in  a 
case  where  the  donor  affixed  the  proper  stamps  to  the 
certificates  at  the  time  of  the  gift  and  delivery  thereof. 
Matter  of  Raleigh  (1911),  75  Misc.  55. 

Failure  to  pay  tax  must  be  pleaded  as  defense.  —  The 
statute  does  not  provide  that  a  person  must  pay  this 
tax  before  he  can  make  or  bring  an  action  to  enforce  a 
contract  for  the  transfer  of  stock.  Such  payment  is  not 
made  a  condition  precedent  to  the  right  to  bring  an 
action,  and  plaintiff  is  not  compelled  to  alleged  compli- 
ance, but  the  failure  to  pay  the  tax  is  matter  to  be 
pleaded  as  a  defense.  Bean  v.  Flint  (1912),  204  N.  Y.  153. 

SEC.  280.  Refund  of  tax  erroneously  paid.  Appli- 
cation. —  The  face  value  of  stock  transfer  stamps  should 
not  be  refunded  to  the  Standard  Oil  Company,  although 
such  company  has  surrendered  certificates  of  stock  held 
by  it  to  its  various  subsidiary  corporations  and  has  issued 
new  certificates  to  those  companies.  Rept.  of  Atty. 
Genl.  Mch.  7,  1912. 

Insurance  Law 

(L.  1909,  chap.  33.    Consol.  Laws  1909,  chap.  28.) 
Life  or  Casualty  Insurance  Corporations  upon  the  Co- 
operation or  Assessment  Plan. 

SEC.  214.  Exemption  of  certain  societies***  from 
the  provisions  of  this  article. 

248 


LAWS  RELATING  TO  STOCKBROKERS 

***The  voluntary  unincorporated  associations  known 
as  the  New  York  Stock  Exchange***  are  exempted  from 
the  provisions  of  this  article. 

Banking  Law 
(L.  1909,  ch.  10.    Consol.  Laws  1909,  ch.  2.) 

SEC.  23.  Books,  papers  and  affairs  to  be  examined. — It 
shall  be  the  duty  of  the  board  of  directors  of  every  bank 
and  trust  company  in  the  months  of  April  and  October  in 
each  year  to  examine  or  cause  a  committee  of  at  least 
three  of  its  members  to  examine  fully  into  the  books, 
papers,  and  affairs  of  the  bank  or  trust  company  of  which 
they  are  directors,  into  the  loans  and  discounts  thereof 
and  particularly  into  the  loans  or  discounts  made  di- 
rectly or  indirectly  to  officers  or  directors  thereof,  or 
for  the  benefit  of  such  officers  or  directors,  or  for 
the  benefit  of  other  corporations  of  which  such  officers 
and  directors  are  also  officers  or  directors,  or  in  which 
they  have  a  beneficial  interest  as  shareholders,  audi- 
tors, or  otherwise,  with  the  special  view  of  ascertaining 
the  value  and  security  thereof,  and  of  the  collateral 
security,  if  any,  given  in  connection  therewith,  and  into 
such  other  matters  as  the  superintendent  of  banks  may 
require.  Such  directors  shall  have  power  to  employ  such 
assistance  in  making  such  examination  as  they  may  deem 
necessary.  On  or  before  the  fifteenth  day  of  the  month 
succeeding  such  examination,  a  report  in  writing  thereof, 
sworn  to  by  the  directors  making  the  same,  shall  be 
made  to  the  board  of  directors  of  such  bank  or  trust 
company,  be  placed  on  file  in  said  bank  or  trust  company, 

249 


STOCK  EXCHANGE  LAWS 

and  a  duplicate  thereof  filed  in  the  banking  department. 
Such  report  shall  particularly  contain  a  statement  of  the 
assets  and  liabilities  of  the  bank  or  trust  company,  ex- 
amined, as  shown  by  the  books  of  the  bank  or  trust 
company,  together  with  such  deductions  from  the  assets 
and  the  addition  of  such  liabilities  direct,  indirect,  con- 
tingent or  otherwise,  as  such  directors  or  committee, 
after  such  examination,  may  find  necessary  in  order  to 
determine  the  true  condition  of  the  bank  or  trust  com- 
pany. It  shall  also  contain  a  statement  showing  in 
detail  every  liability  to  such  bank  or  trust  company, 
direct,  indirect,  contingent  or  otherwise,  of  every  officer 
or  director  thereof  and  of  every  corporation  of  which  any 
such  officer  or  director  is  also  an  officer  or  director,  or  in 
which  corporation  any  such  officer  or  director  is  bene- 
ficially interested  as  a  shareholder,  creditor,  or  otherwise. 
It  shall  also  contain  a  statement,  in  detail,  of  loans, 
if  any,  which  in  their  opinion  are  worthless  or  doubtful, 
together  with  their  reasons  for  so  regarding  them;  also 
a  statement  of  loans  made  on  collateral  security  which 
in  their  opinion  are  insufficiently  secured,  giving  in  each 
case  the  amount  of  the  loan,  the  name  and  market  value 
of  the  collateral,  if  it  has  any  market  value,  and,  if  not, 
a  statement  of  that  fact,  and  its  actual  value  as  nearly 
as  possible.  Such  report  shall  also  contain  a  statement  of 
overdrafts,  of  the  names  and  amounts  of  such  as  they 
consider  worthless  or  doubtful,  and  a  full  statement  of 
such  other  matters  as  affect  the  solvency  and  soundness 
of  the  institution.  If  the  directors  of  any  bank  or  trust 
company  shall  fail  to  make,  or  cause  to  be  made  and  filed, 

250 


LAWS  RELATING  TO  STOCKBROKERS 

such  report  of  examination  in  the  matter,  and  within  the 
time  specified,  such  bank  or  trust  company  shall  forfeit 
to  the  people  of  the  state  one  hundred  dollars  for  every 
day  such  report  shall  be  delayed,  which  penalty  may  be 
recovered  through  an  action  brought  by  the  attorney- 
general  against  such  bank  or  trust  company,  in  the  name 
of  the  people  of  the  state  of  New  York.  The  moneys 
forfeited  by  this  section,  when  recovered,  shall  be  paid 
into  the  state  treasury,  to  be  used  to  defray  the  expenses 
of  the  banking  department. 

(Amended  by  Laws  1913,  ch.  451.     In  effect  May  8, 


251 


TABLE  OF  CASES  CITED 


TABLE  OF   CASES   CITED 

(References  are  to  pages) 

A  Page 

Albers  v.  Merchants'  Exchange,  140  Mo.  App.,  446    ...  3 

Albers  Commission  Co.  v.  Spencer,  205  Mo.,  105        ...  2 

Allen  v.  McConihe,  124  N.  Y.,  342 77 

American  Ins.  Co.  v.  Fisk,  i  Paige,  90 59 

Amsden  v.  Jacobs,  75  Hun,  311 101 

Armstrong  v.  Bickel,  217  Pa.,  173 104 

Armstrong  v.  Danahy,  75  Hun,  405 58 

Arnott  v.  Pittson,  etc.,  Coal  Co.,  68  N.  ¥.,558         .       .       .  in 

Asgood  v.  Bander,  75  Iowa,  550 -75 

Atkinson  v.  Rochester  Printing  Co.,  114  N.  Y.,  175  .  .  .  195 
Austin  v.  Hayden,  Mich.,  137  N.  W.,  317  .  46,  51,  52,  94,  96,  104 

Ayer  v.  Mead,  13  111.  App.  625 83 

B 

Bach  v.  Tuch,  126  N.  Y.,  53 58 

Baker  v.  Drake,  66  N.  Y.,  518 84,87,94 

Baldwin  v.  Flagg,  36  N.  J.  Eq.,  57 74 

Barber  v.  Ellingwood,  144  App.  Div.,  512  .  .  53,  103,  104,  107 
Barber  v.  Ellingwood  No.  2,  137  App.  Div.,  704  .  .  .  in 
Bartlett  v.  Bartlett  &  Son  Co.,  116  Wis.,  450  .  .  .  .7,  24 

Bassett  v.  Irons,  8  Mo.  App.  127 2 

Bassett  v.  Perkins,  65  Misc.,  103 113 

Baster  v.  Board  of  Trade,  83  111.,  146 7,  24 

Bate  v.  McDowell,  40  N.  Y.  Super.  Ct.,  106  76,  78 

Baum  v.  N.  Y.  Cotton  Exch.  4  N.  Y.,  Supp.,  207     .       .        20,  23 

Bean  v.  Flint,  204  N.  Y.,  153 70,  248 

Benvegna  v.  United  Surety  Co.,  196  N.  Y.,  453  ....     230 

Bernheim  v.  Keppler,  34  Misc.,  321 6,  15,  16,  19 

Bigelow  v.  Benedict,  70  N.  Y.,  204  .       .       .       .22,  54,  75 

255 


TABLE  OF  CASES  CITED 

PAGE 

Birnbaum  v.  May,  58  App.  Div.,  76 79 

Blaine  v.  Thomas,  103  App.  Div.,  600 90 

Blodgett  v.  Morril,  20  Vt.,  509 58 

Board  of  Trade  v.  Kinsey,  130  Fed.  507;  198  U.  S.,  236  .  29 
Board  of  Trade  v.  Nelson,  162  111.,  431  .  .  .  2, 3,  25 

Board  of  Trade  v.  Riordan,  94  111.,  App.,  298  ...  20,  25 
Board  of  Trade  v.  Weare,  105  111.  App.,  289  ...  3,  24 

Bostedo  v.  Board  of  Trade,  130  111.  App.,  560     .       .       .3,  24,  27 

Boyce  v.  Grundy,  3  Pet.,  210 59 

Boyle  v.  Henning,  121  Fed.  376        ....        76,  86,  88,  104 

Broad  v.  Hoffman,  6  Barb.,  177 56,  234 

Brown,  In  re,  175  Fed.,  769 no 

Brown,  In  re,  185  Fed.,  766 no 

Brown  v.  Hall,  5  Lans.,  177 54 

Brown  v.  Post,  6  Robt.  in 56,  234 

Bruff  v.  Mali,  36  N.  Y.,  200 59 

Buchanan  v.  Tilden,  18  App.  Div.,  123    ....       55,  56,  234 

Buch  v.  Houghtaling,  no  App.  Div.,  52 81 

Burhorn  v.  Lockwood,  71  App.  Div.,  301  arid.,  177  N.  Y.,  539  .  81 
Burnham  v.  Lawson,  118  App.  Div.,  389  ....  81,  107 
Byrne  v.  Weinfield,  113  App.  Div.,  451 99 

C 

Caldwell  v.  People,  67  111.  App.,  367 50 

Camman  v.  Huntington,  89  App.  Div.,  99 in 

Campbell  v.  Wright,  8  N.  Y.  St.  Rep.,  471  ...  53,  103 
Carlisle  v.  Norris,  142  N.  Y.  Supp.,  393  ...  75,  94,  113 

Cassard  v.  Hinman,  i  Bosw.  207 53 

Cazeaux  v.  Mali,  25  Barb.,  578 59 

Christie  Grain  &  Stock  Co.  v.  Board  of  Trade,  125  Fed.,  161  .       29 

Clappe  v.  Taylor,  125  App.  Div.,  605 94 

Cochran  v.  Adams,  180  Pa.  St.,  289 15 

Cochran  v.  Ellis,  107  111.,  413 77 

Cohen  v.  Budd,  52  Misc.,  217 3,  15 

Colket  v.  Ellis,  10  Phila.,  375 82 

Commonwealth  Bank  v.  Schuylkill  Bank,  i  Pars.  Eq.  Cas.  Pa.,  180      59 

Conklin  v.  Raymond,  127  App.  Div.,  663 78 

Content  v.  Banner,  184  N.  Y.,  121 89,  94 

Cook  v.  Phillips,  56  N.  Y.,  310 56,  234 

256 


TABLE  OF  CASES  CITED 

PACE 

Corp.  v.  Brown,  2  Sand.,  293 55,  234 

Cragie  v.  Hadley,  99  N.  Y.,  131 195 

Crummey  v.  Mills,  40  Hun.,  370 54 

Currie  In  re,  185  Fed.,  263 16,  17 

Curtis  v.  Leavitt,  15  N.  Y.,  9 46 

Custer  v.  Titusville  Gas  Etc.,  Co.  63  Pa.  St.,  381      ...       61 

D 

Davis  v.  Gwynne,  57  N.  Y.,  676 80 

Day  v.  Holmes,  103  Mass.,  306 47,  83 

Denton  v.  Jackson,  106  111.,  438 85 

Denton  v.  MacNeill  L.  R.  2  Eq.,  352 62 

Des  Jardin  v.  Hotchkin,  141  App.  Div.,  845.       ...        82,  85 
Douglas  v.  Carpenter,  17  App.  Div.,  329       ...        46,  96,  97 

Downie  v.  White,  12  Wis.,  176 58 

Dwight  v.  Badgley,  75  Hun.  174 54 

E 

Ennis,  In  re,  187  Fed.,  720 no 

Ennis  v.  Ross,  37  Misc.,  160 113 

ESSCD  v.  Linderman,  71  Pa.  St.,  76 86 

Estes  v.  Perkins,  137  App.  Div.,  367 89 

Evans  v.  Wrenn,  93  App.  Div.,  346 79,103 

Evans  v.  Chamber  of  Commerce,  86  Minn.,  448  ....  7 

F 

Fairbairn  v.  Rausch,  104  App.  Div.,  259 102 

Fairchild  v.  Flowerfelt,  79  Misc.,  42 87,  88 

First  National  Bank  of  Waterloo  v.  Bacon,  113  App.  Div.,  612     98 

Fisk  &  Robinson,  In  re,  185  Fed.,  974 3 

Fletcher  v.  Dold  Packing  Co.,  169    N.  Y.  571  ...       53 

Foster  v.  Murphy  &  Co.,  135  Fed.,  47 85 

Frost  v.  Stokes,  55  N.  Y.,  Super.  Ct.,  76 56 

Fuller  v.  Mun.  Tel.  &  St.  Co.,  117  App.  Div.,  352     .       .        26,  54 
Furniture  Co.  In  re,  170  Fed.,  485          61 

G 

Galigher  v.  Jones,  129  U.  S.,  193 77 

Gen.  Prov.  Assur.  Co.  In  re,  L.  R.,  9  Eq.,  74     ....       58 

257 


TABLE  OF  CASES  CITED 

PAGE 

Gheen  v.  Johnson,  90  Pa.  St.,  38 76,  103 

Gillet  v.  Whiting,  120  N.  Y.,  402 94,  105 

Glynn  v.  Conklin,  127  App.  Div.,  473 69 

Goddard  v.  Merchants'  Exchange,  9  Mo.  App.,  290  .       .        3 

Gould  v.  Trask,  10  N.  Y.  Supp.,  619 101 

Greely  v.  Doran-Wright  Co.,  148  Mass.,  116        ....       83 

Green  v.  Board  of  Trade,  174  111.,  585 3 

Gruman  v.  Smith,  81  N.  Y.,  25 86,  94 

Guffanti  v.  National  Surety  Co.,  196  N.  Y.,  452         .       .       .     230 

H 

Haebler  v.  N.  Y.  Prod.  Exch.,  149  N.  Y.,  414  ....  8 
Haight  v.  Dickerman,  18  N.  Y.  Supp.,  559  ....  2,  19 
Haight  v.  Haight  &  Freese  Co.,  46  Misc.,  501;  102  App.  Div., 

475 26,  50 

Hall  v.  Baker,  66  App.  Div.,  131 195,  199 

Hallett's  Estate,  In  re,  L.R.  138  Ch.D.,  696 109 

Hardy  v.  Jaudon,  i  Rob.,  261  45 

Harris  v.  Pryor,  18  N.  Y.  Supp.,  128      .       .       .       .        88,  93,  100 

Harris  v.  Turnbridge,  83  N.  Y.,  92 76 

Hawley  v.  Kountze,  6  App.  Div.,  217 56,57,234 

Hayes  In  re.  75  N.  Y.  Supp.,  312 12,  15 

Heath  v.  Griswold,  5  Fed.,  573 46 

Heath  v.  President  of  Gold  Exchange,  7  Abb.  Pr.  N.  S.,  251  6 
Heim  v.  N.  Y.  Stock  Exch.,  64  Misc.,  529;  Affd.  138  App.  Div.,  96 

23,  26,  28,  52 

Hellman,  Matter  of,  174  N.  Y.,  254 n 

Helm  v.  Ennis,  109  App.  Div.,  42  76 

Hentz  v.  Minor,  18  N.  Y.  Supp.,  880 54 

Hess  v.  Rau,  95  N.  Y.,  359       ...  ...     74,  103 

Hess  Malting  Co.  v.  Warren,  15  111.  App.,  507 2 

Hickok  v.  Cowperthwait,  137  App.  Div.,  94  ....  98 
Hoffman  v.  Livingston,  46  N.  Y.  Super.  Ct.,  552  .  .  .  76 

Holmes  v.  Seaman,  184  N.  Y.,  486 39 

Hopkins  v.  O'Kane,  167  Pa.  St.,  478 74 

Horton  v.  Morgan,  19  N.  Y.,  170 82,  83 

Hunt  v.  Marquand,  109  App.  Div.,  729 99 

Kurd  v.  Taylor,  181  N.  Y.,  231 54,  77, 107 

Hurlbutt,  Hatch  &  Co.  In  re,  135  Fed.,  504        .       .       .        12,  13 

258 


TABLE  OF  CASES  CITED 

PACK 

Hurst  v.  N.  Y.  Produce  Exch.,  100  N.  Y.,  605  ....  25 
Hurt  v.  Miller,  120  App.  Div.,  833  .....  77,  107 
Hutchinson  v.  Lawrence,  67  How.  Pr.,  38  ....  23,  25 
Hyde  v.  Woods,  94  U.  S.,  523 12 

I 

Illingworth  v.  De  Mott,  59  N.  J.  Eq.,  8 76 

J 

Jackson  v.  Foote,  12  Fed.,  37           75 

Jones  v.  Gallagher,  3  Utah,  54 80 

Jones  v.  Seaman,  133  App.  Div.,  127 106 

K 

Keller  v.  Halsey,  202  N.  Y.,  588 92 

Kent  v.  DeCoppet,  149  App.  Div.,  589 32 

Ketcham  v.  Provost,  156  App.  Div.,  477 14,  97 

Kilmer  v.  Hutton,  131  App.  Div.,  625 77,  105 

King  v.  Zell,  105  Ind.,  435 74 

Kingsbury  v.  Kirwan,  43  N.  Y.  Super.  Ct..  451  .  .  53,  57 
Kisch  v.  Venezuela  Cent.  R.  Co.,  34  L.  J.  Ch.,  545  .  .  62 

Knowlton  v.  Fitch,  52  N.  Y.,  288 74 

Konta  v.  St.  Louis  Stock  Exchange,  189  Mo.,  26.       .       .       .       n 

Kridel  v.  Bloomingdale,  149  App.  Div.,  605 101 

Kruse  v.  Kennett,  181  111.,  109 54 

L 

La  Gar  v.  Carey,  12  N.  Y.  St.  Rep.,  171 54 

La  Grange,  etc.,  Plank  Road  Co.  v.  Mays,  29  Mo.,  64     .       .       58 

Lambert  v.  Addison,  46  L.  T.  Rep.,  20 22 

Langer  v.  Price,  114  App.  Div.,  78 88 

Lawrence  v.  Maxwell,  53  N.  Y.,  19 46,  84 

Lazare  v.  Allen,  20  App.  Div.,  616 53,  88,  103 

Leech  v.  Harris,  2  Brewst.  (Pa.),  571      ....         19,  23,  24 

Lehman  v.  Feld,  37  Fed.,  852 83 

Leiter  v.  Thomas,  no  App.  Div.,  879 88,  91 

LeMarchant  v.  Moore,  79  Hun,  352 108 

Leo  v.  McCormack,  142  App.  Div.,  741 112 

Levy  v,  Loeb,  85  N.  Y.,  365 76,  84 

259 


TABLE  OF  CASES  CITED 

PAGE 

Levy  v.  Potter,  104  App.  Div.,  457 113 

Lewis  v.  Wilson,  121  N.  Y.,  288 22,  25 

Life  Assn.  of  England,  Re,  34  Beav.,  639 58 

Ling  v.  Malcolm,  77  Conn.,  517 83 

Litchfield  Bank  v.  Church,  29  Conn.,  137 58 

Little  v.  McClain,  152  App.  Div.,  197 81,  112 

Livermore  v.  Bushnell,  5  Hun,  285 in 

Logan  v.  Tel.  etc.  Co.,  157  Fed.,  570 54 

Lowenberg  v.  Greenbaum,  99  Cal.,  162 12 

Lurman  v.  Jarvie,  8  App.  Div.,  37 24 

Lynch  v.  Simmonds,  67  N.  Y.  Supp.,  420 77 

M 

McCabe  v.  Emmons,  51  N.  Y.  Super.  Ct.,  219  .        12,  13,  219 

McCabe  v.  Lawrence,  51  N.  Y.  Super,  219  .       .        .        .       12 

McDearmott  Commission  Co.  v.  Board  of  Trade,  146  Fed.  961      29 

McGinnes  v.  Smythe,  101  N.  Y.,  646 93 

Mcllvaine  v.  Egerton,  2  Rob.,  422 53 

Mclntyre  v.  Whitney,  130  App.  Div.,  557 in 

Mclntyre,  In  re,  181  Fed.,  955 no 

MacDonald  v.  Ackley,  93  Pa.  St.,  277 39 

MacDowell  v.  Ackley,  93  Pa.  St.,  277 39 

Mangles  v.  Grand  Collier  Dock  Co.,  10  Sim.,  519;  16  Eng.  Ch.,  519  58 
Manning  v.  Heidelbach,  153  App.  Div.,  790  .  .  .  90,  106 

Markham  v.  Jaudon,  41  N.  Y.,  235 83,  86,  94 

Marye  v.  Strouse,  5  Fed.,  483 47,  78,  84 

Marylebone  Banking  Co.,  Matter  of,  3  De  G.  &  S.,  21       ...       58 

Mayer  v.  Monzo,  151  App.  Div.,  866 46,85,97 

Michael  v.  Hart  (1901),  2  K.B.,  867;  L.T.  Rep.  (N.S.),  548     .       .     100 

Miller  &  Co.  v.  Lyons,  Va.  74  S.  E.,  194 89 

Mills  v.  Gould,  42  N.Y.  Super.  Ct.,  119 2 

Mills,  Matter  of,  125  App.  Div.,  730,  .  .  .  too,  106,  107,  no 
Minnesota  Lumber  Co.  v.  Whitebreast  Co.  160  III.,  85  ...  54 
Moffatt  v.  Board  of  Trade,  Mo.,  11  S.  W.,  894  .  .  .  7,  23,  37 
Moore  v.  Rodewald,  142  App.  Div.,  741  ....  105,  112 

Morgan  v.  Jaudon,  40  How.  Pr.,  366 93 

Morris  v.  Grant,  34  Hun.,  377 3,  6,  9 

Moyse  v.  N.  Y.  Cotton  Exchange,  143  App.  Div.,  265  .  .  25 
Mullen  v.  Quinlan  &  Co.,  195  N.  Y.,  109  .....  107 

260 


TABLE  OF  CASES  CITED 

PAGE 

Muller  v.  Bensley,  20  111.  App.,  530 75 

Mulligan,  In  re,  116  Fed.,  715 106 

Musco  v.  United  Surety  Co.,  196  N.  Y.,  459       ....     230 

N 

Nashua  Savings  Bank  v.  Abbot,  181  Mass.,  531  ....  13 
Nat.  League  of  Com.  Merchants  v.  Hornung,  148  App.  Div.,  355 

2,  7, 19,  20 

Neilson  v.  James,  9  Q.  B.  D.,  546 83 

Nelson  v.  Board  of  Trade,  121  111.,  412  .  .  .  .  21,  23 
Newkirch  v.  Keppler,  56  App.  Div.,  225  ....  20,  21 
Newman  v.  Lee,  87  App.  Div.,  116 77,  84 

O 

O'Dell  v.  Boyden,  150  Fed.,  731 12,  13, 16 

P 

Pacaud  v.  Waite,  218  111.,  138 2,  7 

Page,  In  re,  107  Fed.  89     .               13 

Page  v.  Edmunds,  187  U.  S.,  590 12 

Parish  v.  N.  Y.  Produce  Exch.  169  N.  Y.,  34      ....  39 

Paton  v.  Newman,  51  La.  Ann.,  1428 2 

Peabody  v.  Speyers,  56  N.  Y.,  230 2 

Pearce  v.  Foote,  113  111.,  228 54 

Peck  v.  Doran,  etc.,  Co.  46  Hun,  454 54 

Peckham  v.  Ketchum,  5  Bosw.,  506 in 

Peckham  v.  Ketchum,  90  Pa.  St.,  38 76 

Peller  v.  Leiter,  189  N.  Y.,  361 50 

People  v.  Board  of  Trade,  45  111.,  112 2,  3 

People  v.  Board  of  Trade,  80  111.,  134 20,  23 

People  v.  Board  of  Trade,  224  111.,  370 39 

People  v.  Duffy-Mclnnerney  Co.,  122  App.  Div.  336         .        .  69 

People  v.  East  Buffalo  Live  Stock  Assn.,  88  App.  Div.,  619    .  24 

People  v.  Feitner,  167  N.  Y.,  i 12 

People  v.  Goslin,  67  App.  Div.,  16,  affd.  171,  N.  Y.,  627   .      62,  207 

People  v.  Meadows,  199  N.  Y.,  i 109 

People  v.  N.  Y.  Produce  Exch.,  149  N.  Y.,  401  ...        20,  24 

People  v.  Reardon,  197  N.  Y.,  236 69 

People  v.  St,  Nicholas  Bank,  77  Hun,  159; 196 

261 


TABLE  OF  CASES  CITED 

PAGE 

People  v.  Severance,  67  Hun,  182,  196 

People  v.  Todd,  51  Hun,  446 55 

People  v.  Wade,  59  N.  Y.  Supp.,  846 55 

People  ex  rel.  Farrington  v.  Mensching,  187  N.  Y.,  8        .       .       68 
People  ex  rel.  Hatch  v.  Reardon,  no  App.  Div.,  821,  184  N.  Y. 

431,  204  U.  S.,i52  69 

People  ex  rel.  Isaacs  v.  Moran,  74  Misc.,  491       .       .       .     240,  241 

Picard  v.  Beers,  195  Mass.,  419 77 

Pickering  v.  Demerritt,  100  Mass.,  416  ....        47,  84 

Pickering  v.  Templeton,  2  Mo.  App.,  424 58 

Pierson  v.  Frenkel,  103  N.  Y.  Supp.,  49 94 

Pitcher  v.  Board  of  Trade,  121  111.,  412 21,  24 

Pixley  v.  Boynton,  79  111.,  553 75 

Platt  v.  Jones,  96  N.  Y.  24 12 

Porter  v.  Wormser,  94  N.  Y.,  431  ....          47,  79,  84 

Post  v.  Thomas,  153  App.  Div.,  865 80 

Potter  v.  Malcolm,  104  N.  Y.  Supp.,  760 83 

Prout  v.  Chisholm,  89  Hun,  108 60,  78 

Pugh  v.  Moore,  44  La.  Ann.,  209 113 

Q 

Quelle        Paine,  39  Misc.,  712 93 

Quentell  r.  N.  Y.  Cotton  Exch.,  56  Misc.,  150    ...  25 

R 

Raleigh,  Matter  of,  75  Misc.,  55 69,  248 

Ramsey  v.  Muller,  202  N.  Y.,  72 81 

Reichard  v.  Hutton,  138  App.  Div.,  122 77 

Reichland  v.  Hutton,  148  App.  Div.,  813 105 

Renville,  Matter  of,  46  App.  Div.,  37 29 

Rice  v.  Davis,  136  Pa.  St.  430 84 

Richter  v.  Poe,  (Md.)  71  All.,  420  ....        78,  84,  100,  103 

Ridgeley  v.  Taylor  &  Co.,  118  App.  Div.,  10       ....  80 

Ritchie  v.  Burke,  109  Fed.,  16 46 

Ritter  v.  Cushman,  35  How.  Pr.,  284 86 

Robinson  v.  Pittsburgh,  etc.,  R.  Co.,  32  Pa.  St.,  334.       .        .  61 

Rock  v.  Carpenter,  no  N.  Y.  Supp.,  261 81 

Rogers  v.  Wiley,  14  N.  Y.,  Supp.,  622,  affd.  131  N.  Y.,   527 

86,  93,  101 

262 


TABLE  OF  CASES  CITED 

PAGE 

Rorke  v.  San  Francisco  Stock  and  Exch.,  Bd.,  99  Cal.  196      .       17 
Rosenbaum  v.  Stiebel,  122  N.  Y.  Supp.,  131        ...      88,  108 

Rosenstock  v.  Torney,  32  Md.,  169 83 

Rothschild   v.   Allen,   90  App.  Div.,  233,    affd.   180  N.  Y.,  561 

45.  46,  95,  96 

Ruggles  v.  Brock,  6  Hun,  164 61 

Russel  v.  N.  Y.  Produce  Exch.  27  Misc.,  381       ....       28 

Rutland  R.  Co.  v.  Haven,  62  Vt.,  39 59 

Ryan  v.  Cudahy,  157  111.,  108 24,  25 

Ryan  v.  Lamson,  44  111.  App.,  204 21 

S 

Schulteis  v.  Caughey,  146  App.  Div.,  102 112 

Seymour,  Johnson  &  Co.,  Matter  of,  37  Misc.,  264     .       .       .6,  16 

Shannon  v.  Chenay,  156  Cal.,  567 12 

Sheridan  v.  Tucker,  145  App.  Div.,  145          .        .        .      .  69,  70,  243 

Shiel  v.  Stoneham,  77  Misc.,  125 94 

Shotwell  v.  Mali,  38  Barb.,  445 59 

Skiff  v.  Stoddard,  63  Conn.,  198 46,  96 

Small  v.  Housman,  208  N.  Y.,  115 87,  91,  92,  93 

Smith  v.  Craig,  151  App.  Div.,  648 88 

Smith  v.  Savin,  141  N.  Y.,  515 46 

Smith  v.  Tracy,  30  N.  Y.,  79 in 

Soby  v.  People,  134  111.,  66 50 

Sonneborn  v.  Lavarello,  2  Hun,  201 7 

Sparhawk  v.  Yerkes,  142  U.  S.,  i 12 

Spear  v.  Hart,  3  Rob.,  420 83 

Sprague  v.  Currie,  133  App.  Div.,  18  76,  81,  94,  106 

Springs  v.  James,  137  App.  Div.,  no 53,82 

Stan  ton  v.  Small.  3  Sandf.,  230 53 

Stapleton  v.  O'Dell,  21  Misc.,  94  196 

Staples  v.  Gould,  9  N.  Y.,  520 54,  213 

State  v.  Milwaukee  Chamber  of  Commerce,  47  Wis.,  670          .       24 

Stenton  v.  Jerome,  54  N.  Y.,  480  86,  93 

Sterling  v.  Jaudon,  48  Barb.,  459 53,  103,  104 

Stewart  v.  Drake,  46  N.  Y.,  449 88 

Stewart  v.  Harris,  101  App.  Div.,  181 81 

Stone  v.  Lothrop.  109  Mass.,  63 82 

Story  v.  Salomon,  71  N.  Y.,  420 54,  75 

263 


TABLE  OF  CASES  CITED 

PAGE 

Strickland  v.  Magoun,  119  App.  Div.,  113  .  .  .45,  96,  97,  99 
Swift  v.  San  Francisco  St.  Exch.  Board,  67  Cal.,  567  .  .  39 

T 

Talcott  v.  Standard  Oil  Co.,  149  App.  Div.,  694  .  .  .113 
Taylor  v.  Ketcham,  35  How.  Pr.  289;  5  Rob.,  507  .  77,  85,  87,  106 
Thompson  v.  Adams,  93  Pa.  St.,  55  .  .  .  .  2,  13,  15 

Thornburgh  v.  Newcastle,  etc.  R.  Co.,  14  Ind.,  499    ...       62 

Thorne  v.  Prentiss,  83  111.,  99 2 

Tompkins  v.  Morton  Trust  Co.,  91  App.  Div.,  274    ...       94 

Tracy  In  re,     191  Fed.,  810 45,  99 

Treadwell  v.  Clark,  114  App.  Div.,  403,  affd.  190  N.  Y.,  51        98,  99 

Tuell  v.  Paine,  39  Misc.,  712 76 

Tyler  v.  Barrows,  6  Rob.,  104 53 

U 

Union  Nat.  Bank  v.  Hunt,  76  Mo.,  439 62 

U.  S.  Radiator  Corp.  v.  State  of  N.Y.,  208  N.  Y.,  144         .       .      69 

V 

Vanderpoel  v.  Kearns,  2  E.  D.  Smith,  170  .  .  .  .56,  234 
Van  Dusen-Harrington  Co.  v.  Jungeblut,  75  Minn.,  298  .  .  83 

W 

Washburn  v.  Franklin,  28  Barb.,  27 213 

Waugh  v.  Seaboard  Bank,  54  N.  Y.  Super.  Ct.,  283  .  .  3 
Weare  Commission  Co.  v.  People,  209  111.,  528  .  .  .  .  50 

Weidenfeld  v.  Keppler,  84  App.  Div.,  235 23 

Weir  v.  Dwyer,  114  N.  Y.  Supp.,  528 77,  90 

Weld  v.  Cable  Co.,  199  N.  Y.  88  54 

Weston  v.  Ives,  97  N.  Y.,  222 2 

West  v.  McLaughlin,  162  Fed.,  124 no 

West  v.  Wright,  86  Hun,  436 54 

Wheeler  v.  Newbould,  16  N.  Y.,  392 87 

White  v.  Brownell,  2  Daly,  329        .       .       .  2,  3,  13,  21,  22 

White  v.  Smith,  54  N.  Y.,  522 53,  74,  103 

White  Mountains  R.  Co.  v.Eastman,  34  N.H.,  124  ....  58 
Whitlock  v.  Seaboard  Nat.  Bank,  29  Misc.,  84  .  .  .  .47 
Wilde,  In  re,  133  Fed.,  562 56,  234 

264 


TABLE  OF  CASES  CITED 

PAGE 

Willard  v.  White,  56  Hun,  581          .......     108 

Willets  v.  Poor,  141  App.  Div.,  743 61 

Winston  v.  F.  A.  Longshore  &  Co.,  116  La.,  21  .       .       .       .86 

Wolff  v.  Lockwood,  70  App.  Div.,  569  107 

Wood  v.  Fisk,  141  N.  Y.  Supp.,  342 98,  106 

Woodward  v.  Stearns,  10  Abb.  Pr.  N.  S.,  395       .        .        .56,  235 

Wright  v.  Toomey,  137  App.  Div.,  401 56 

Wronkow  v.  Clews,  52  N.  Y.  Super.  Ct.,  176       .       .       .       .80 

Y 
Young  v.  Eames,  78  App.  Div.,  229 20,    26 

Z 

Zeller  v.  Leiter,  114  App.  Div.,  148 53 

Zimmerman  v.  Heil,  156  N  .Y.,  703 77 


265 


INDEX 


INDEX 

(References  are  to  pages) 

FACE 

Account,  agreement  to  carry  for  a  definite  period        .       .       .     100 

"         joint 113 

"         stated  defined 112 

Accounts,  essential  facts  of 27,  182 

"         of  the  Exchange 122,  130 

"        ,  fictitious  names  .       .       .       .       .       .       .27,  182 

"        ,  keeping  proper 78 

Accusations,  method  of  procedure 21,  140,  142 

Acting  for  buyer  and  seller 84 

"        "     foreign  corporations 205 

Acts  detrimental  to  welfare  of  Exchange        .  .    186,  190,  191 

"      of  partner,  responsibility  for 171 

Additional  margin,  waiver  of  customers'  default    ....       93 

Addresses  of  members 36,  170 

Adequate  margin 38,  190 

Admissions,  Committee  on 6,  127 

"  its  jurisdiction 6n. 

Admission  to  membership 10,  133 

Adopted  child,  gratuity  to 38,  145 

Advances  on  collateral  security 56,  223 

"      ,  pledging  stock  for 45 

"      ,  right  to,  on  authorized  sale in 

Adverse  interest,  creating,  custom  disapproved      ....       83 

Advertisements 37,  175 

false,  as  to  securities 60,  208 

"  to  depress  market  value 62 

Agents,  solicitation  of  business  by 36,  172 

Agreement  as  to  margin 91 

"           to  carry  customer's  account  for  a  definite  period    .       .     100 
Altering  contracts,  custom  disapproved 83 

269 


INDEX 

PAGE 

Alternative  demand  for  margin  insufficient 86 

Anti-bucket  shop  law 49,  199 

Appeals 10,  28,  132 

Application  of  proceeds  of  membership 14, 135 

Applications  for  membership 10,  133 

"  "  "         ,  misstatement  on         ...      20,  140 

Appointees 116,  126 

Arbitrage,  domestic 35,  175 

foreign 35,  176 

Arbitration 6,  127 

"          Committee 6,  127 

"  "         ,  Appeals  from 6,  128 

"  clause,  effect  of 6n. 

Arrangements,  Committee  of 5,  ia6 

Assessments  on  death  of  members 38 

"  "          "  ,  failure  to  pay       .       .       .       .      n,  134,  144 

Assistant  Chairman 5,  122 

"At  three  days,"  bids  and  offers 25,  154 

Authority  to  sell,  discretionary 80 

Authorization  to  sell,  distinguished  from  order       ....       78 

"  "    "    ,  makes  notice  unnecessary     ....       94 

Award  of  arbitrators,  effect  of .      7n. 

"Bank,"  unauthorized  use  of  the  term 198 

Bankers,  misconduct  by ,       .  196 

Banking  Law,  examination  of  books  and  papers   ....  249 

"        "     ,  licenses,  bonds  and  deposits 225 

"        "     ,  Constitutionality  of  Statute 229 

Banking  licenses,  books  to  be  kept  and  records  made        .       .  230 
"            "        ,  penalty  for  conducting  business  without  c^-ense, 

etc 231 

"  "        ,  perjury 232 

"  "        ,  penalty  for  failure  to  make  reports  .       .       .  233 

Banks,  misconduct  by 196 

Betting i?3 

Bids  and  offers 24,  153 

"      "        "      ,  rules  covering 176 

Bids  or  offers,  variation 155 

Bills  of  foreign  banks,  unlawful  discount  of   .       .       .       .  198 

270 


INDEX 

FAGX 

Bonds,  (See  "Securities,"  "Stocks") 

Books  of  corporations,  closing  of 165 

"      "  "  ,     "        "     during  deliveries       .       .       .158 

"      "  Exchange 122,  130 

"      "  members  20,  21,  141 

Borrowing  and  lending  (See  "Loans") 

Branch  houses 17^ 

Branch  offices 36, 170,  iya 

Brokerage  on  loans 55,  23^ 

"          "      "     ,  recovery  of  excess 55,  234 

Broker's  correspondent,  his  agent 103 

"         duty  as  to  retaining  stock  purchased         ...        .94 

"         insolvency  stock  goes  to  customer loS 

"         lien in 

"         own  name,  custom  as  to  purchase  in  .       .       .83 

"         ,  right  to  pledge  margined  stock  en  bloc        ...       95 

Brokers,  transactions  by,  after  insolvency       ....      51,  210 

Bucket  shop 27,  49,  179 

"          "  ,  denned 50,  202 

"          "  ,  law  as  to 49, 199 

"          "  ,  corporations,  penalty  for  second  offence      .       .       .     202 
"          "  ,  transactions  with  or  for,  forbidden      .       .       .       27,179 

"Bull"  denned 74 

"Bunching"  orders  prohibited 34,  183 

Business  Conduct,  Committee  on 7,  129 

Business  hours 23,  152 

"         ,  solicitation  of 33,  36,  168,  172,  181 

Buyer  and  Seller,  acting  for 84 

Buyers'  duties  on  comparison 29,  155 

"         options,  bids  and  offers 25,  154 

rights 29,  157 

Buying  customers'  stocks 84 

"         on  margin,  valid 84 

By-laws,  when  reasonable,  sustained  by  courts  .  .  .  .  3n. 
"  upheld  when  not  against  public  policy  ....  311. 
"  courts  will  construe 3D. 

"Call"  denned 75 

Calls 153 

271 


INDEX 

PAGE 

Capital  stock,  notice  of  increase  of  .       .       .•'.".       .       .      33,  167 

Care  required 75 

"Cash"  bids  and  offers 25,  154 

Certificate  of  stock,  etc.,  change  in  form        ....      33,  168 
"      "     ,  not  a  negotiable  instrument  .       .       .       .113 
"  "      "     ,  transfers  of  (See  "Transfers") 

Chairman 5,  122 

"          ,  Assistant 5,  122 

"          ,  gratuity  fund  trustees 148 

Charges  against  members 21,  22,  142,  143 

City  bonds,  listing 9,  131 

"      "      ,  commission  rate  on 169,  183 

Claims  between  partners 16,  136 

"      filing 15,  136 

"Claims  of  members,"  meaning  of 1511- 

Clearances  for  members 1 80,  183 

"  "    non-members 180 

Clearing  charges 180 

Clearing  House 30, 31,  160 

"    ,  Committee  on 8,  129 

"    ,  orders    binding 157 

"    ,  exchange  of  tickets         ...        29,  30,  156,  159 

Clerk  of  broker  as  customer's  agent 112 

Clerks,  doing  business  for 181 

"     ,  employment  of,  for  business  obtained  forbidden      .      34,  181 

"     ,  speculative  transactions  for 27,  181 

Closing  contracts  "Under  the  Rule"       ....       30,31,32,161 

(See  also  "Under  the  Rule") 
"        out  transactions  on  default,  custom  as  to.       .       .       .       83 

Collateral  security,  advances  on 56,  233 

"  "       ,  sale  of,  customs  as  to       .       .       .       .        82,  83 

Collection  of  dividends,  charge  for 33,  167 

Commission  rule,  money  advances  upon  unusual  terms       .      35,  185 

"  "    ,  penalty  for  violation  of       .       .       .       .      35,  170 

"  "    ,  relieving  customer  from  part  of  stamp  tax    .       35 

"    ,  special  or  unusual  rates  of  interest          .      35,  185 

Commissions,  Committee  on 8,  129 

"          ,  right  of  suspended  member       .       .       .       .      35,  170 
"  must  be  charged 34,  168 

272 


INDEX 

PAGE 

Commissions,  must  be  net 34,  168 

"  ,  "bunching"  orders  prohibited  ....      34,  168 

"          ,  rates  of          34,  169 

"          ,  reciprocal  business 35,  182 

"  ,  taking  over  transactions 183 

"  ,  on  government  securities 184 

"  ,  on  mining  shares 182 

Committees,  standing 5-10, 126 

"         ,  ad  interim 121 

"         ,  fees  to 118 

"         ,  vacancies  in 132 

Communications  to  Exchange 37,  174 

Comparison,  responsibility  for  losses  by          .       .       .       .      37,  184 

Comparisons 29,  30, 155,  184 

Compulsion,  to  sell  when  broker  is  under  no        ....       80 
Conducting  transactions,  statutory  enactments      ....       83 

Conduct  of  business,  rules  for 23,152 

"        disorderly 23,  152 

Consenting  to  felony 47 

Consideration,  validity  of  certain  agreements  made  without     .       53,213 
Consolidated  Stock  Exchange,  transaction  of  business  with  mem- 
bers prohibited  27 

Constitution,  alterations  of 37,  174 

"  ,  Committee  on 8,  130 

,  signing  of n,  133 

"  ,  violation  of 20,  141 

Continuous  quotations 175 

Contracts,  altering,  custom  disapproved  83 

"       ,  liability  on .       .     30,  155 

"        ,  maturity  of,  on  transfer  of  membership      .       .    14,  134 

"        ,  on  holidays 154 

"       ,  settlement  of 30,  158 

"       ,  subject  to  rule  of,  Exchange  153 

"       ,  deposits  on 32,  164 

"       ,  closing 31,  161 

"       ,  disagreements 30,  156, 164 

"       ,  written 25,  154 

Conversion 45, 46, 99,  105 

"          ,  by  selling  without  notice 87 

273 


INDEX 

PAO* 

Conversion,  sale  without  demand  and  notice         ....       93 

Cooperation  with  insolvent  broker 51,  104 

Cornering  the  market,  illegal m 

Corporations,  acting  for  foreign 205 

"  ,  frauds  in  organization  of 57,  204 

Correspondent,  broker's  his  agent 103 

Counsel  of  Exchange  S,  120 

"    ,  Gratuity  Fund 150 

"    ,  professional,  excluded 22,  144 

Courts,  interference  of  2in.,  22n.,  23n. 

Creditor,  members,  rights  of 17,  136 

Customer's  agent,  notice  to 92 

"  death  102 

"  stock,  buying 84 

Customs  and  usages  of  Exchange  govern 82 

"      "          "         ,  approved          ....      83 
"      "          "         ,  disapproved      ...       47,  83 

Damages  for  default,  claims  for.       .        30,  31,  32,  158,  159,  161,  162 

"     ,  measure  of,  sale  of  stock 107 

Dealing  outside  of  Exchange  prohibited          .       .       .       .       23,  152 

"     ,  suspension  of 33,  168,  187 

"        in  Exchange  with  non-members          ....       20,  140 

"       in  dividends 33,  167 

"        in  privileges 26,  155 

"        in  differences  or  quotations 26,  179 

"        for  clerks 27,  181 

"     ,  members'  transactions  with  himself    ....       26,  178 

"        outside  of  business  hours 23,  152 

"     ,  reckless  and  unbusinesslike 19,  139 

Dealings,  inquiry  into 8,  130 

Death,  customer's 102 

"Debts,"  meaning  of ign. 

Deceased  members 16,  17,  38,  136,  148 

Decorum 37,  173 

Default  as  to  margin,  waiver  of 93 

"       in  delivery  (See  "Deliveries") 

"       of  customer,  custom  as  to  closing  out      ....      83 

"    ,  transactions  on 83 

274 


INDEX 

FAGl 

Defrauded  customer  of  insolvent  broker,  rights  of       .       .       .108 

Deliveries 30,  157 

"       ,  necessity  for  stamped  sales  ticket  .       .       .       .      31,  186 

"         by  certificate  or  transfer 30,  157 

"         during  "closing"  of  books 30,  158 

"       ,  hours  for,  and  payment 30,  158 

"      ,  default,  damage 30,  31,  158,  159 

Delivery  of  memoranda  of  transactions  .       .       .       .      47,  212 

Demand  and  notice,  sale  without,  a  conversion  ...       93 

"         for  margin,  necessity  for 86 

"         must  be  specific 86 

"      ,  alternative  insufficient 86 

"         for  money  deposited 113 

Deposits  in  insolvent  bank,  receiving 195 

on  contracts  32,  164 

"      ,  due  bills  for  dividends 32,  166 

Differences,  arbitration  of 6,  128 

"  as  to  terms  of  contract 37,  164 

"          ,  dealing  in 26,    79 

"  on  comparison 30,    56 

Disagreement  on  terms  of  contract 36,  164 

Discount,  unlawful,  of  bills  of  foreign  banks 198 

Definite  order,  broker  must  obey 77 

Definition  of  terms 50,  74 

Discretion,  order  to  sell  at 80 

Discrimination  by  Exchange  or  members        .       .       .       .      52,  203 

Disorderly  conduct 37,  173 

Disposal  of  membership  of  deceased  members  16,  136 

"        "  "  expelled  members         .       .       17,  18,  136 

Dividends 33,  165 

"        ,  charge  for  collecting 33,  165 

"         ,  dealing  in,  prohibited 33,  167 

Due  bills 32,  166 

Dues  and  Fines n,  133 

Elections,  annual 123 

"  ,  special 126 

Eligibility  for  membership 10,  133 

"  to  offices 125 

275 


INDEX 

PAGE 

Employees  (See  "Clerks") 

Equitable  principles  of  trade i,  23,  117 

Evidence,  production  of 22,  141 

Exchange,    objects  of i,  117 

"        ,  government  and  officers  of 3,  117 

"        ,  hours  of  business 23,  152 

"        ,  minutes  of 173 

"        ,  special  closings 152 

"         ,  special  meetings 4,  120 

"        ,  or  members,  discrimination  by  .       .       .52,  203 

Exchanges,  other  in  New  York 140,  152 

Ex-dividend 33,  165 

"Exhausted"  margin  defined 85 

Exhaustion  of  margin 80 

notice  of 86 

"        "  "       "  object  of 87 

"       "  "       "  reasonableness  of  ....       87 

Exhibiting  quotations 201 

Expulsion,  right  to  provide  for ign,  2^n. 

"       ,     "    of  courts  to  interfere,        .        .        .          2in,  22n,  23n. 
"       ,     "      "  member  to  notice  and  hearing     .       .  24n,  25n. 

must  be  contested  promptly nn. 

"        .effect 17,  19,  22n,  23n.  136,  139 

"        ,  readmission  after 6,  127 

"Ex-rights" 33,  166 

Extension  of  time  to  insolvent  18,  138 

"  "       "  ,  misstatement 20,  140 

Failure  to  affix  stamps 31,  186 

"      "    exchange  clearing-house  tickets       .       .       .       .      30,  159 

"       "     make  deposits 32,  165 

"      "     execute  orders 82 

Failures,  number  of 43 

False  rumors  as  to  stock,  bonds  or  public  funds 207 

"       statement  or  advertisement  as  to  securities      .        .        .       60,  208 

Fees  to  committees 118 

Felony,  manipulation  of  prices  of  securities    .  * . , .       .       .       .       48 

"      ,  anti-bucket  shop  law 49 

"      ,  trading  against  customers'  orders 47 

276 


INDEX 

PAGE 

Felony,  unauthorized  pledging  of  customers'  securities      .       .        45 
Fictitious  person,  signing  name  of,  to  subscription       .       .      57,  204 

"         transactions 48, 49 

"  "  ,  custom  disapproved 83 

forbidden 26,  155 

"         names  accounts  in 27,  182 

"         reporting  or  publishing 59,  207 

Filing  claims  15,  136 

Finance  Committee 8,  130 

Finances  of  Exchange 8,  130 

"        "    gratuity  fund 149 

Fines n,  133 

"Fly-power"  denned 75 

Foreign  arbitrage  176 

"        corporations  acting  for 205 

"       partnerships 35.  36,  170,  172 

Fraud  or  fraudulent  acts 21,  140 

Frauds  in  organization  of  corporations 57,  204 

Fraudulent  issue  of  stocks  and  bonds 58,  204 

Futures,  contracts  in,  not  illegal 53 

"      ,  dealings  in       ...  55 

"      ,  options  in,  when  valid 54 

Gambling  transactions 53,  54 

Good  faith  and  care  required 75 

Governing  Committee 3, 4,  118 

"  "          ,  vacancies  in 119 

,  quorum 119 

,  adjourned  meetings 120 

"          ,  special  meetings 6,  120 

,  resolutions  of,  violation  of        .       .       21,  141 

Government  of  Exchange 3»ii7 

securities,  listing  of 9,  131 

Gratuity  Fund 37,  38,  144 

"  "  ,  its  trustees 39,  148 

"  ,  purposes 145 

"  ,  liability  of  Exchange  and  members      .       .       .     147 

"  ,  assessments 144 

"  ,  reduction  of 147 

277 


INDEX 

PAGE 

Gratuity  Fund,  beneficiaries 145 

"  ,  benefits  not  part  of  estate  of  member  .  .  147 

"  ,  investments 148,  149 

"  "  ,  "  ,  organization  of 148 

"  ,  officers 149 

"  ,  vacancies 148 

"  ,  amendment  of  rules 39 

Guaranteeing  stock in 

Half-holidays,  contracts  falling  due  on 154 

"  "        ,  loans  of  money  or  securities  on  day  preceding  155 

"        ,  deposits  called  on 165 

Holidays,  closing  Exchange 152 

(See  also  "Half-holidays") 

Hours  of  business 23,  152 

Hypothecation,  when  larceny 106 

(See  also  "Pledging") 

Improper  use  of  customer's  securities       ....      37,  190,  191 

Indebtedness,  disputed  prior 77 

Indecorous  conduct  or  language 37,  173 

Initiation  fee 10,  133 

Insolvencies,  committee  on 8,  130 

Insolvency 17,  137 

,  transactions  by  brokers  after        .       .       .       .      51,  210 
,  of  broker,  stock  goes  to  customer       ....     108 

Insolvent  members,  announcement  by 17,  137 

"  bank  receiving  deposits  in 195 

broker,  cooperating  with 51,  104 

"  broker,  rights  of  decrauded  customer  of       .       .       .108 

member,  closing  contracts  of  .       .       .       .      31,  161 

"      ,  extension  of  time 18,  137 

,  "  misstatement  on  application  21,  140 

"      ,  reinstatement 1 8,  137,  138 

,  list  of  creditors  18,  19,  138,  139 

,  commission  rates  to          .       .       .       .      34,  170 

"      ,  reckless  and  unbusinesslike  dealings     .       19,  139 

"         ,  when  broker  is 51 

Insurance  law,  exemption  of  Exchange  from          ....     243 

278 


INDEX 

PAGE 

Interest 37,  165,  167,  185 

"  ,  creating  adverse,  custom  disapproved  ....  83 
"  ,  payment  of,  without  effecting  loan  .  .  .  .185 
"  ,  permitted  on  advances  on  collateral  security.  .  56,  233 

"      ,  Rates  of  • 35 

Investigations 119 

Irregularity  in  securities 37,  164 

Issue  of  stocks  and  bonds,  fraudulent 58,  204 

Joint  account 113,  169,  176 

"     deposits 32,  164,  165 

Just  and  equitable  principles  of  trade      .       .          i,  7n.  23,  117,  141 

Keeping  proper  accounts 78 

Larceny 45 

"        ,  where  securities  hypothecated 106 

Law  Committee 9,  130 

Laws  and  Decisions,  summary  of 43 

Laws  covering  stockbrokers,  scope  of 43 

Lender  of  securities  (see  "Loans") 

Lien,  broker's in 

Loans  of  money  or  securities  not  effected       ....     167,  185 

"       subject  to  rule  of  Exchange 153 

"  of  money  or  securities,  closing  under  rule  .  31,  32,  158,  163 
"  of  money  or  securities  due  on  holidays  .  .  .  .154 
"  "  "  "  "  ,  notice  of  return  .  .  .  .159 

"    ,  brokerage  on 55,  234 

"    ,  recovery  of  excess 55,  235 

"    ,  restitution  a  bar  to  further  penalties 235 

Manager  of  branch  office 36,  172 

Manager's  acts,  broker  bound  by 76 

Manipulation  of  prices  of  securities  .       .       .       .  .      48,  208 

Manner  of  Sale 79 

Margin,  adequate 38,  190 

"     ,  broker's  course  on  exhaustion  of 80 

"     ,  buying  on,  valid 84 

"     ,  defined 74, 85 

279 


INDEX 

PAGE 

Margin,  necessity  for  demand  for  86 

"     ,  demand  for  must  be  specific 86 

"     ,        "          "     alternative,  insufficient         ....       86 

"     ,  notice  of  exhaustion  of 86 

"     ,      "      "     ,  object  of 87 

"     ,      "      "    ,  sufficiency  of 87 

"     ,  reasonable  time  to  make  good  88 

"     ,  special  agreement  as  to 91 

"     ,  waiver  of  customer's  default  as  to 93 

Margined  stock,  sub-pledging  en  bloc 46 

"    ,  must  be  purchased 84 

"  "    ,  broker's  right  to  pledge 95 

"    ,      "  "      "      "      en  bloc    ....      95 

"  "    ,  sale  of  sufficiently  85 

Market,  cornering,  the,  illegal in 

"      ,  quotations,  transactions  on  basis  of         ....       49 

"      ,  sale  at  the 101 

Maturity  of  contracts  on  transfer  of  membership         .       .       12,  134 

Measure  of  damages 107 

Member  of  Exchange,  (See  "Membership") 

"         "  "        ,  dealings  of,  inquiry  into     ...        9,  130 

"         "  "       ,         "        on  other  exchanges       .        .       23,  152 

"         "  "        ,         "        with  non-members        .        .       23,  140 

"       ,        "        with  one's  self      ,        .       .       .178 

"        ,  debts  of 14,  135 

Members,  discrimination  by 52,  203 

number  of 10 

Membership,  admission  to 10,  133 

"        ,  application  for 10,  133 

"        ,  eligibility  for 10,  133 

"        ,  transfer  of n,  134 

"        ,  how  increased 10,  133 

"        ,  readmission 6,  127 

"        ,  reinstatement         .       .       .       .       .       .       .       18,  138 

"        ,  application  of  proceeds  of 14,  135 

"        ,  of  deceased  member,  disposal  of       ...       16,  136 

Memoranda  of  transactions,  delivery  of 47,  212 

Mining  shares,  commission  on 182 

Minor  offence,  procedure     ,      .      ,      ,      ,      ,      .      .     22, 143 

tfo 


INDEX 

PAGE 

Minutes 37,  173 

Misconduct  by  banks  and  bankers  196 

Misdemeanor,  failure  to  deliver  memoranda  of  transactions      48,  212 

Money  deposited,  demand  for 113 

"        loans,  (See  "Loans") 
Mutual  deposits  32,  164 

Names  of  persons  dealt  with  to  be  forwarded  to  customers      .       49 

Nominal  margin,  agreement  as  to 9? 

"       positions  for  employees 181 

Nominating  Committee 123 

Non-members,  arbitration  by 6,  127 

"  "       ,  commission  rates  to 34,  169 

Notice,  loans,  return  of 30,  159 

"      ,  closing  of  contracts  under  rule 31,  162 

"      ,  mutual  deposits 32,  164 

"      ,  time  contract 25,  154 

"      ,  of  transactions  to  customer 76 

"         of  exhaustion  of  margin 86 

"  "          "          "     ,  object  of 87 

"         "  "  "    ,  reasonableness  of        ...       87 

"         of  time  and  place  of  sale,  sufficiency  of  ...       89 

"      ,  not  necessary  when  direct  authorization  to  sell       .        .       94 

"         to  customer's  agent 92 

"      ,  waiver  of  reservation  in  contract  to  close  without         .       89 

Number  of  members ion.  133 

"        "          "        ,  increase  of 10,  133 

Officers  of  Exchange,  powers  and  duties 4 

"      "            "        ,  eligibility 125 

"      "  "        ,  removal 9,  126 

"        ,  compensation 118 

Offices  of  members  (See  "Branch  Offices") 

"Option"  defined 74 

Options  in  futures,  when  valid 54 

Options  sometimes  prohibited  by  statute 54 

Order,  broker  must  obey  definite 77 

"    ,  distinguished  from  authorization  to  sell      ....  78 

"    ,  proof  of  receipt  of 79 

28l 


INDEX 

PAGE 

Order,  to  sell  at,  discretion 80 

Orders,  customers,  trading  against 47,  209 

Orders,  failure  to  execute 82 

"      ,  waiver  or  revocation  of 82 

Organization  of  corporations,  frauds  in 57,  204 

Partners,  commission  rate  to 169 

"       ,  general  and  special 36,  171 

"       ,  foreign 36,  171 

"       ,  responsibility  for  acts  of 36,  172 

"       ,  persons  ineligible  as 36,  171 

"        ,  claims  between 16,  136 

Partnerships  (See  also  "Partners") 36,  171 

"        ,    registration  of  and  changes  in    .       .       .       .      36,  171 

"        ,    undesirable 36,  171 

"        ,    dissolution  of 36, 171 

Payment 30,  157 

before  delivery 30,  77 

Penalties,  violation  of  commission  law 34,  170 

"      ,       "          "    provision  of  Constitution    ...       22,  141 
"      ,       "          "    rule  of  Governing  Committee     .       .       22,  141 

"      ,  violation  of  partnership  rule 36,  172 

"      ,         "        "    branch  office  rule          ....      36,  172 

"         for  non-payment  of  dues  and  fines        .       .       n,  133,  134 

Period,  agreement  to  carry  account  for  a  definite        .       .       .     100 

"Personal  Liability"  securities 29,  157 

Place  of  sale,  sufficiency  of  notice  of 89 

"      "  transaction,  customer  to  be  notified  of    .       .       .       -49 

Pledgee  from  broker,  right  of 99 

Pledge  of  margined  stock,  right  of 95 

"        "   stocks,  en  bloc 95 

Pledging  stock 97 

"     ,  waiver  of  pledgee's  lien 98 

"     ,  for  advances 45 

"  "     ,  left  for  safe  keeping 52 

Pledging  of  customer's  securities,  unauthorized      .       .       .      44,  211 

Pooled  stock 79 

Premiums 165, 167 

President 4,  120 

282 


INDEX 

PAGE 

Presumption  of  value 78 

Price  of  securities,  manipulation  of 48,  208 

Principal  and  agent,  acting  as  47 

"        ,  duty  on  comparisons 29,  156 

"        ,  substitution  of 29,  157 

"        ,  undisclosed 113 

Prior  indebtedness,  disputed 77 

Privileges,  dealing  in,  forbidden 26,  155 

"  for  non-member,  commission  on 190 

Proceeds  of  membership,  application  of 14,  135 

Proof  of  receipt  of  order 79 

Prospectus,  subscribing  name  of  another  in    .       .       .       -57,  204 
Publishing  or  reporting  fictitious  transactions         .        .        .       59,  207 

Purchase  in  broker's  own  name,  as  to 82 

Purpose  of  Stock  Exchange i 

"Put",  defined 75 

Quorum  of  Committees 132 

"        "    Exchange 125 

"        " .  Governing  Committee 119 

"        "    Gratuity  Fund  trustees 149 

Quotation  service 127 

Quotations,  dealing  in 29n,  179 

"         ,  continuous  or  frequent 175 

"         ,  exhibiting  201 

Ratification  of  unauthorized  pledge 46 

"     transaction 81 

Readmission  to  membership 6,  127 

Reasonable  time  to  make  margin  good 88 

Rebatement  of  assessments  to  members 147 

"    commissions 34,  168 

Receipt  of  order,  proof  of 79 

Receiver  of  securities,  rights  and  duties  of 158 

"       "         "         ,  must  not  deduct  damage    ....     159 

Receiving  deposits  in  insolvent  bank 195 

Reckless  and  unbusinesslike  dealing 37,  190, 191 

Reclamation 164 

Reestablishment  of  contract  (See  "Under  the  Rule") 

283 


INDEX 

PAGE 

Registration  of  address 36,  170 

"        ,    branch  office 36,  170 

"        ,    partnership  and  changes 36, 171 

"        ,    securities 33,  167 

"        ,    wire  connections 28,  189 

Registry  office  of  corporation 33>  167 

"Regular  way"  bids  and  offers 25,  154 

Reinstatement 18,  137 

Removal  of  appointees,  clerks,  etc 126 

"          "    officers  of  Exchange 126 

"          "    Trustees  of  Gratuity  Fund 151 

"         "    securities  from  list 9,  131 

Reporting  or  publishing  fictitious  transactions       ...      59,  207 

"         transactions 29,  155 

Resolutions  of  Governing  Committee,  violation  of        .       .       22,  141 

Responsibility  for  accounts 182 

Return  of  loans  (See  "Loans") 

Revenue  tax 186 

Rights  of  defrauded  customer  of  insolvent  broker        .       .       .     108 
"        "    receiver  or  seller  of  securities          .       .       .       .      32,  166 

"      pertaining  to  securities 32,  166 

Rules  of  Exchange  as  between  broker  and  customer    .       .       .       82 

"      "          "          "        "         members 2 

"  ,  power  of  Exchange  to  make 3 

"  ,  member  cannot  deny  reasonableness  of        ....         3 
Rumors,  false,  as  to  stocks,  etc 207 

Salary  of  employees  in  branch  offices 36,  172 

"  "  "  for  procuring  business  ....  34,  168 

"  "  "  of  Clearing  House 129 

"  "  "  of  officers  and  appointees  .  .  .  .118 

Sale  at  the  market 101 

"  ,  manner  of 79 

"  of  collateral  security,  customs  as  to  .  .  .  .  82,  83 

"  ,  sufficiently  margined  stock 85 

"  ,  unauthorized in 

"  with  no  change  of  ownership 191 

"  ,  without  demand  and  notice,  a  conversion  ....  93 

Sales,  short 103 

284 


INDEX 

PAGE 

Sales,  tickets,  revenue  stamp  on 31,  186 

Fame  security,  orders  to  buy  and  sell 26,  176 

Seat  on  Exchange,  is  property  .  .  .  .  nn,  i2n,  i3n. 
"  ,  disposal  of,  on  insolvency  ....  izn. 
"  ,  consent  to  transfer  necessary  .  .  .  i2n. 
"  ,  cannot  be  sold  as  collateral  ....  i4n. 
"  ,  trustee  in  bankruptcy  gets  title  to  .  .  i2n. 

Secret  profits 76 

"  "    ,  ratification  of  taking  of 81 

Secretary  of  Exchange 5,  122 

"        "    Gratuity  Fund    .  149 

Securities  Committee  on 9,  131 

"  its  jurisdiction gn. 

"       ,  manipulation  of  prices  of 208 

"       ,  suspension  of  dealing  in 33,  168 

"       ,  removal  from  list 33,  168,  187 

"       ,  change  in  form  of  certificate 33,  155 

"       ,  commissions  on  transactions  in 169 

"       ,  contracts,  rules  for  settlement        .       .       .       .        9,  131 
"       ,  deliveries  (See  "Deliveries,"  "Under  the  Rule") 

"       ,  increase  of  capitalization 33,  167 

"       ,  listing  of 9,  131 

"       ,  loans  of  (See  "Loans")     . 

"       ,  payment  for 30,  157 

"       ,  rights  pertaining  to  33,  166 

"       ,  transfer  and  registry 33,  165 

"       ,  unauthorized  pledging  or  other  disposition  of  custom- 
er's securities 44,  211 

Seller  and  buyer,  acting  for 84 

"    ,  rights  of 32,  165 

"    ,  duties  on  comparison 29,  156 

"Seller's"  options,  bids  and  offers 25,  154 

Settlement  of  contracts 30,  158 

Shares  of  stock,  transfers  of  (See  "Transfers") 

"Short  sale"  defined 74 

Short  sales 103 

Short  selling  valid 53 

Signature  to  Constitution,  effect  of >  .       .     133 

Smaller  quantity  than  ordered,  purchase  of  .       .       . .    .-.       78 

285 


INDEX 

PAGE 

Solicitation  of  business      .  36,  172 

Special  agreement  as  to  margin gi 

"      committees 132 

"      partners 36,  171 

Specialists 26,  178 

Stamp  Tax  (See  "Stock  Transfer  Stamp  Tax")     .       .       .       .186 

Stamps,  failure  to  affix 31,  186 

Standing  Committees S-io,  126 

Statement,  false,  as  to  securities 60,  208 

of  transactions 201 

State  securities,  listing  of .       .        9.  131 

"        ,  commission  rates  on        .       .       .       .       .       .169 

Statutory  enactments,  disregarding  custom  disapproved          .       .       83 
Stock  certificate  not  a  negotiable  instrument         .       .       .       .113 

"      goes  to  customer  on  broker's  insolvency      ....     108 

"    ,  guaranteeing m 

"    ,  margined,  must  be  purchased 84 

"    ,  pledging 97 

"    ,          "     ,     waiver  of  pledgee's  lien 9$ 

"    ,  pooled 79 

"    ,  tender  of 93 

"    ,  transfers  of  certificates  and  shares  of  (see  "Transfers") 

"    ,  list,  Committee  on 9,  131 

"    ,  listing  of  securities,  dealt  in 9, 131 

"    ,  list  removal  from 9,  131 

Stock  Transfer  Tax  Law 236 

"  "  "       "  ,  amount  of  tax 65,  236 

"  "  "       "  ,  application 65,  237 

"             "           "       "  ,  effect  of  amendment  of  1911       .      68,  238 
"             "           "       "  ,  taxable  transfers      .       .       .       .65,  239 
"             "           "       "  ,  compromise  of  claims     ....     240 
"                         "       "  ,  stamps,  how  prepared  and  sold  .       66,  240 
"                   "  ,  selling  stamps  without  consent  of  comp- 
troller   240 

"  "  "      "  ,  penalty  for  failure  to  pay  tax     .       66, 241 

"  "  ,  canceling  stamps,  penalty  for  failure    66,  242 

"  "  "       "  ,  contracts  for  dies;  expenses,  how  paid  242 

"  "  "       "  ,  illegal  use  of  stamps,  penalty   .       .      66, 243 

"  "          "      "  ,  power  of  state  comptroller    .       .      67, 243 

286 


INDEX 

PAGE 

Stock  Transfer  Tax  Law,  books  and  records  ...        67,  69,  246 
"  "  "       "  ,  civil  penalties,  how  recovered      .       .     246 

"  "  "      "  ,  effect  of  failure  to  pay  tax  .       .       68, 247 

"  "  "       "  ,  refund  of  tax  erroneously  paid    .       .     248 

"  "  "      "  ,  summary 65 

(See  "Commision  rule") 
Stocks  (See  "Securities") 

"      ,  buying  customer's 84 

"      ,  false  rumors  as  to,  etc 207 

"       and  bonds,  fraudulent  issue  of 58,  204 

"Stop  order"  denned 78 

Sub-pledging  margined  stock  en  bloc 46 

Subscribing  name  of  another  in  prospectus,  etc     .       .       .      57,  204 

Subscription  receipts,  listing  of 9,  131 

"  rights,  commission  rates 169 

Subscription,  signing  name  of  fictitious  person  to         .       .       57,  204 

Subscriptions  for  collateral  purposes  only 58 

Substitute  principal 29,  157 

Sufficiently  margined  stock,  sale  of 85 

Summary  of  Laws  and  Decisions .43 

"         proceedings 22,  143 

Suspension  of  members,       ...      17,  18,  19,  20,  21  22,  137,  139 

"  "        "        ,  how  period  determined    .       .       .       .       19 

"        "       ,  for  what  imposed       .       .       .       .        20,21 

"  "        "        ,  committees  finding  final    ....       22 

"  "        "       ,  announcement  of 22 

"       ,  effect  of 22 

"  of  dealings  in  securities 34,  168 

Table  of  cases  cited 253 

Taking  over  position,  commission  rate 183 

Tax  law,  transfer,  summary 65 

Telegraph  and  telephone  connections  with  non-members     28,  187, 189 

"                 "                "     Consolidated;      con- 
nection with  Exchange  operator,  pay  of 189 

Telephone  (see  "Telegraph") 

Tender  of  stock 93 

Testimony,  requirement  to  give  • 22,  141 

Time  and  place  of  sale,  sufficiency  of  notice  of    .       .       .       .       89 

287 


INDEX 

PAGE 

Time  and  place  of,  transaction  to  be  furnished  to  customer      .       49 
"        "      "      "    contracts  (see  "Written  Contracts") 
"        "      "      "    extension  of  (see  "Insolvent") 

Trading  against  customer's  orders 47,  209 

Transaction,  ratification  of  unauthorized 81 

Transactions  (see  "Dealings") 

"          by  brokers  after  insolvency        .       .       .       .      51,  210 
"        ,  closing  out  on  defendant,  custom  as  to          .  83 

"        ,  delivery  of  memoranda  of  .       .       .  47,  212 

"        ,  fictitious 48 

"        ,  notice  of,  to  customer 76 

"        ,  statement  of  201 

Transfer  agency  of  corporation 33,  167 

"       books,  closing  of 33,  165 

"       of  membership n,  134 

"       "             "        ,  maturity  of  contracts  on  .        .        .       12,  134 
Transfers  of  certificate  and  share  of  stock      .       .       .       .      62,  213 
"        "           "        ,  how  title  transferred           .        .        .       62,  214 
Transfers  of  powers  of  those  lacking  full  legal  capacity  and  of  fidu- 
ciaries not  enlarged 62,  124 

"        ,  corporations  not  forbidden  to  treat   registered  holder 

as  owner 63,  215 

"       ,  title  derived  from  certificate  extinguishes  title  derived 

from  a  separate  document 63,  215 

"        ,  who  may  deliver  a  certificate 63,  216 

"       ,  effectuality  of  indorsement 63,  216 

"        ,  rescission  of  transfer 63,  217 

"        ,  "      does   not  invalidate  subsequent 

transfer  by  transferee  in  possession     .       .       .      63,  217 
"        ,  delivery  of  unindorsed  certificate  imposes  obligation  to 

"        ,      indorse 63,  218 

ineffectual  attempt  to  transfer  amounts  to  a  promise  to 

transfer 63,  218 

"  ,  warranties  on  sale  of  certificate  .  .  .  .  63,  219 
"  ,  no  warranty  implied  from  accepting  payment  of  a  debt  64,  219 
"  ,  no  attachment  or  levy  upon  shares  unless  certificate  sur- 
rendered or  transfer  enjoined  .  .  .  .  64,  220 
"  ,  creditors'  remedies  to  reach  certificate  .  .  .  64,  220 
"  ,  no  lien  or  restriction  unless  indicated  on  certificate  64,  220 

288 


INDEX 

PAGE 

Transfers,  alteration  of  certificate  does  not  divest  title  to  shares  64,  221 

"        ,  lost  or  destroyed  certificate 64,  221 

"        ,  rule  for  cases  not  provided  for  by  the  act  .       .       .     221 

"        ,  interpretation 222 

"       ,  definition  of  indorsement 222 

"        ,  definition  of  person  appearing  to  be  the  owner  of  certifi- 
cate       223 

"        ,  other  definitions 223 

"        ,  article  does  not  apply  to  existing  certificates     .       .       65,  224 
"        ,  inconsistent  legislation  repealed 224 

Treasurer  of  Exchange 5,  121 

"         "  Gratuity  Fund 140, 

Trials,  minor  offenses,  summary  proceedings  ....       22,  143 

"  ,  major  offenses 22,  142 

"  ,  adjournment  of 119 

"  ,  counsel  excluded 22,  144 

Trust  companies,  doing  business  for  clerks  of        ...       27,  181 

"  "        ,  Gratuity  Fund 150 

"  "        ,  mutual  deposits 32,  164 

Trustees  of  bond  issues 33,  168 

"          "  Gratuity  Fund  (see  "Gratuity  Fund") 

Unauthorized  pledge  of  customers'  securities  .       .       .       .      44,  211 

"  "      ratification  of  46 

"  sale,  right  to  advances,  etc in 

"  transaction,  ratification  of 81 

"  use  of  the  term  "bank" 198 

Unbusinesslike  dealings 19,  139 

"Under  the  rule",  contracts  of  insolvents       .       .       .       .      31,  161 
"        "      "  ,  duties  of  chairman       ....      31,  161,  163 

"        "      "    ,  notice  of  intention 32,  161 

"        "      "    ,  notice  of  closing 162 

"        "      "  ,  parties  in  interest 162 

"        "      "   ,  settlement  price  if  not  closed  out    .       .      32,  162 
"        "      "   ,  damages  resulting  from  securities  pledged  for 

loan 32,  163 

Undisclosed  principal 113 

Unlawful  discount  of  bills  of  foreign  banks  intention  by  one  party 
only 54,  198 

289 


INDEX 

PAGE 

Usages  of  Exchange  govern 82 

Usury        .  56 

Vacancies  in  Governing  Committee 119 

"         "   offices 125 

"         "   chairmanship 122 

"         "   Committees      . 132 

"         "   Gratuity  Fund 148 

Validity  of  certain  agreements  made  without  consideration       53,  213 

Vice-President 4,  121 

"          "     ,  Vacancy  in  office 126 

Violation  of  branch  office  or  partnership  law         .        .        .       36,  172 

commission  law 3^  IjO 

provision  of  Constitution 22,  141 

resolution  of  Governing  Committee.       .       .       .       22,  141 

"          rules  covering  bids  and  offers 155 

Visitors 37,  173,  174 

Voting  power,  pertaining  to  securities 33,  166 

Wager 53-55 

Waiver  of  customer's  default 93 

"       "    pledgee's  lien 98 

"       "    reservation  to  close  without  notice        ....       89 

Welfare  of  Exchange,  act  detrimental  to 22,  142 

Wire  connections,  approval  of  by  committee  of  arrangements     28,  189 
(see  also  "Telegraph  and  Telephone") 

Witness,  requirement  to  testify 22,  141 

"      ,  right  to  produce,  etc 22,  141 

Written  contracts,  when  they  must  be  made         ...       25,  154 

"  "        ,  notice  under 25,  154 

"  "        ,  liability  fixed 29,  157 


2QO 


THE   COUNTRY    LIFE    PRESS 
GARDEN   CITY,  N.  Y. 


University  of  California 

SOUTHERN  REGIONAL  LIBRARY  FACILITY 

405  Hilgard  Avenue,  Los  Angeles,  CA  90024-1388 

Return  this  material  to  the  library 

from  which  it  was  borrowed. 


ANGELES 


m  f\f\f\  "' ""'  *'"'  'III  '"I 


